Question

Beyer Company is considering the purchase of an asset for $215,000. 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		$	87,000			$	42,000			$	96,000			$	150,000			$	54,000			$	429,000

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

Complete this question by entering your answers in the tabs below.

• Required A
• Required B

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

Complete this question by entering your answers in the tabs below.

• Required A
• Required B

Should Beyer accept the investment?

	Should Beyer accept the investment?

	Year Net Cash Flows Present Value of 1 at 12% Present Value of Net Cash Flows 1 2 3 4 5 Totals Amount invested Net present value

Answer 1

Requirement A:

Year	Net Cash Flows	Present Value of 1 at 12%	Present Value of Net cash flows
1	$87,000	0.89286	$77,679
2	$42,000	0.79719	$33,482
3	$96,000	0.71178	$68,331
4	$150,000	0.63552	$95,328
5	$54,000	0.56743	$30,641
Totals			$305,461
Amount invested			($215,000)
Net present value			$90,461

Requirement B:

Beyer should accept the investment because NPV is positive.