Beyer Company is considering the purchase of an asset for $245,000. It is expected to produce...

Beyer Company is considering the purchase of an asset for $245,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 12% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

	Year 1			Year 2			Year 3			Year 4			Year 5			Total
Net cash flows		$	68,000		$	45,000		$	85,000		$	143,000		$	35,000		$	376,000

a. Compute the net present value of this investment.
b. Should Beyer accept the investment?

Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)

Year	Net Cash Flows	Present Value of 1 at 12%	Present Value of Net Cash Flows
1	not attempted	not attempted	not attempted
2	not attempted	not attempted	not attempted
3	not attempted	not attempted	not attempted
4	not attempted	not attempted	not attempted
5	not attempted	not attempted	not attempted
Totals	$0		$0
Amount invested			not attempted
Net present value			$0

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Beyer Company is considering the purchase of an asset for $270,000. It is expected to produce...

Beyer Company is considering the purchase of an asset for $270,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 66,000 $ 39,000 $ 67,000 $ 200,000 $ 22,000 $ 394,000 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2...

A company is considering purchasing new equipment. The purchase of the equipment is expected to...

A company is considering purchasing new equipment. The purchase of the equipment is expected to generate after tax savings of $12,600 each year for 8 years. The company can borrow money at 6%. Assume annual compounding. Determine the present value of the future cash inflows. Hint: the $12,600 are your annuity payments

Company A is considering the purchase of a new machine. The new machine is not expected...

Company A is considering the purchase of a new machine. The new machine is not expected to affect revenues, but pretax operating expenses will be reduced by $12,700 per year for 10 years. The old machine is now 5 years old, with 10 years of its scheduled life remaining. It was originally purchased for $61,500 and has been depreciated by the straight-line method. The old machine can be sold for $20,700 today The new machine will be depreciated by the...

You are offered a chance to buy an asset for $8,000 that is expected to produce...

You are offered a chance to buy an asset for $8,000 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset?

ABC, Inc., is considering purchase of a new equipment. The expected sales are expected to be...

ABC, Inc., is considering purchase of a new equipment. The expected sales are expected to be $5,129,153. The annual cash operating expenses are expected to be $3,759,421. The annual depreciation is estimated to be $406,529 and the interest expense is estimated to be $179,173. If the tax rate is 27%, what is the operating cash flow?

Telstar Communications is going to purchase an asset for $420,000 that will produce $200,000 per year...

Telstar Communications is going to purchase an asset for $420,000 that will produce $200,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12–12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 percent tax bracket. Fill in the schedule below for the next four years. Earnings before depreciation and taxes year 1 year 2...

Telstar Communications is going to purchase an asset for $760,000 that will produce $370,000 per year...

Telstar Communications is going to purchase an asset for $760,000 that will produce $370,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12–12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 percent tax bracket. Fill in the schedule below for the next four years. Year 1 Year 2 Year 3 Year 4 Earnings...

ABC Corp. is considering investing in a project requiring the purchase of a depreciable asset. The...

ABC Corp. is considering investing in a project requiring the purchase of a depreciable asset. The initial cost of the asset is $800,000 with no expected salvage value. There are two methods of depreciating this asset that are acceptable to the IRS. The amount of depreciation expense that would be recognized by year appears below for each of the two methods: Method Year 1 Year 2 Year 3 Year 4 1 $200,000 $200,000 $200,000 $200,000 2 $400,000 $400,000 0 0...

Tocserp is considering the purchase of a new machine that will produce widgets. The widget maker...

Tocserp is considering the purchase of a new machine that will produce widgets. The widget maker will require an initial investment of $12,000 and has an economic life of five years and will be fully depreciated by the straight line method. The machine will produce 1,400 widgets per year with each costing $2.00 to make. Each will be sold at $4.50. Assume Tocserp uses a discount rate of 14 percent and has a tax rate of 34 percent. What is...

You are considering the purchase of a machine with an expected life of 3 years. It...

You are considering the purchase of a machine with an expected life of 3 years. It costs $800,000 and belongs to class 10 (CCA rate = 30%). Its estimated market value at the end of 3 years equals $125,000. The number of products you expect to sell over the next 3 years is 20,000, 25,000 and 20,000 in years 1, 2 and 3, respectively. Expected selling price per unit is $100 while annual production costs consist of $50,000 in fixed...

Subjects