Homework Answers
| Ans.A | Net present value = Present value of cash inflow - Investment | |||
| $295591.960 - $259000 | ||||
| $36,591.960 | ||||
| Present value of cash inflow = Annual cash inflow * PV of Annuity 7% | ||||
| 82000 * 3.60478 | ||||
| $295,591.960 | ||||
| Calculation of PV @ 12%: | ||||
| Year | ||||
| 1 | 1 / (1 + 0.12)^1 | 0.89286 | ||
| 2 | 1 / (1 + 0.12)^2 | 0.79719 | ||
| 3 | 1 / (1 + 0.12)^3 | 0.71178 | ||
| 4 | 1 / (1 + 0.12)^4 | 0.63552 | ||
| 5 | 1 / (1 + 0.12)^5 | 0.56743 | ||
| Present value of an annuity | 3.60478 | |||
| Ans.B | Profitability index = Present value of cash inflow / Investment | |||
| $295591.960 / $259000 | 1.141 | |||
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s. V The Bing Co. project has estimated annual net cash flows of $82000 for 5...
5. V The Bing Co. project has estimated annual net cash flows of $82000 for 5...
5. V The Bing Co. project has estimated annual net cash flows of $82000 for 5 years and is Tows of $82000 for 5 years and is estimated to cost $259000. Assume a minimum acceptable rate of return of . Assume a minimum acceptable rate of return of 12%. Using the present value table 4 uetermine (A) the net present value of the protect and (Bl the present value of the rounded to Two Places (16)
s. V The Bing Co. project has estimated annual net cash flows o f $82000 for...
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