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PRESENT VALUE OF AN ANNUITY OF $ TABLE 2 4% 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193PRESENT VALUE OF AN ANNUITY OF $ TABLE 2 4% 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193Brett Collins is reviewing his companys investment in a cement plant. The company paid $15,800,000 five years ago to acquire

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Answer #1

Requirement a. and b. Calculation of NPV for expected and actual cash flow

a Net Present Value( Expected) $                  57,118
b Net Present Value( actual) $       (31,155,931)

Calculated as following

Calculation of Net Present Value
year Expected Cash Flow PV factor@ 12% Present Value
0 $              (15,800,000) 1 $          (15,800,000)
1 $                  3,320,000 0.892857 $              2,964,285
2 $                  4,950,000 0.797194 $              3,946,110
3 $                  4,610,000 0.71178 $              3,281,306
4 $                  5,120,000 0.635518 $              3,253,852
5 $                  4,250,000 0.567427 $              2,411,565
NPV $                    57,118
Calculation of Net Present Value
year Actual Cash Flow PV factor@ 12% Present Value
0 $              (15,800,000) 1 $          (15,800,000)
1 $                  2,600,000 0.892857 $              2,321,428
2 $                  3,040,000 0.797194 $              2,423,470
3 $                  4,850,000 0.71178 $              3,452,133
4 $                  3,810,000 0.635518 $              2,421,324
5 $                  3,570,000 0.567427 $              2,025,714
NPV $            (3,155,931)

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