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In: Accounting

Campbell Company is considering investing in two new vans that are expected to generate combined cash...

Campbell Company is considering investing in two new vans that are expected to generate combined cash inflows of $30,000 per year. The vans’ combined purchase price is $94,500. The expected life and salvage value of each are four years and $20,900, respectively. Campbell has an average cost of capital of 12 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required

  1. Calculate the net present value of the investment opportunity.

Solutions

Expert Solution

Year Cash Flow PV Factor PV Of Cash Flow
a b c=1/1.12^a d=b*c
0 $ -94,500 1 $         -94,500.00
1 $   30,000 0.892857 $           26,785.71
2 $   30,000 0.797194 $           23,915.82
3 $   30,000 0.711780 $           21,353.41
4 $   30,000 0.635518 $           19,065.54
4 41800 0.635518 $           26,564.66
Net Present Value $           23,185.14
Salvage Value = 20900*2 =$41800

ekkarill92 answered 2 years ago
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