The management of Osborn Corporation is investigating an investment in equipment that would have a useful...

The management of Osborn Corporation is investigating an investment in equipment that would have a useful life of 6 years. The company uses a discount rate of 12% in its capital budgeting. The net present value of the investment, excluding the annual cash inflow, is ?$406,214. To the nearest whole dollar how large would the annual cash inflow have to be to make the investment in the equipment financially attractive? (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.

Multiple Choice

$48,746

$67,702

$98,811

$406,214

Solutions

Expert Solution

Please comment for any queries... Thank you!!!

Since in the case of annual cash inflows of $ 406716 per annum results in higher NPV. It is the attractive one but investment amount itself cannot be recovered in the first year itself practically. so the option of $ 98811 also could be considerable for NPV since resulting in positive figures than that of other options. So Ans is option D. 406214

ekkarill92 answered 1 year ago

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