The following data concern an investment project (Ignore income taxes.): Investment in equipment$180,000 Annual net cash inflows$42,000 Salvage value of the equipment$70,000 Working capital required$20,000 Life of the project 5yearsRequired rate of return 12%The working capital will be released for use elsewhere at the conclusion of the project.See separate Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.Required:Compute the project's net present value.
What will be an ideal response?
| Year | |||||||||
| Now | 1-5 | 5 | |||||||
| Initial investment | $ | (180,000 | ) | ||||||
| Working capital | $ | (20,000 | ) | $ | 20,000 | ||||
| Annual net cash flow | $ | 42,000 | |||||||
| Salvage value | $ | 70,000 | |||||||
| Total cash flows (a) | $ | (200,000 | ) | $ | 42,000 | $ | 90,000 | ||
| Discount factor (12%) (b) | 1.000 | 3.605 | 0.567 | ||||||
| Present value of cash flows (a) × (b) | $ | (200,000 | ) | $ | 151,410 | $ | 51,030 | ||
| Net present value | $ | 2,440 | |||||||
You might also like to view...
Exchange gains and losses are reported on the income statement
Indicate whether the statement is true or false
Which of the following is not a factor that directly affects the budget for a discretionary cost?
a. the importance of the activity to the achievement of the organization's goals b. last period's budget c. the expected level of operations d. managerial negotiations in the budgeting process
Kahn Corporation (a multi-product company) produces and sells 8,000 units of Product X each year. Each unit of Product X sells for $10 and has a contribution margin of $6. If Product X is discontinued, $50,000 of the $60,000 in annual fixed costs charged to Product X could be eliminated. The annual financial advantage (disadvantage) for the company of eliminating this product should be:
A. ($2,000) B. $2,000 C. $12,000 D. ($12,000)
Garber Corporation had 40,000 shares of $10 par common stock outstanding on January 1, Year 2. On June 1, Year 2, Garber purchased 5,000 shares of its own stock on the open market for $22 per share and held it as treasury stock. On October 1, Year 2, Garber declared and issued a 10% stock dividend. The market value of Garber's stock was $24 per share on October 1, Year 2. Garber's board of directors declared and paid a cash dividend of $57,750 on December 15, Year 2. Required:a) What was the cash dividend per share that was paid on December 15?
What will be an ideal response?