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question 25

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The following details are provided by Beckett Company: Initial investment $2,020,000 Discount rate 12% Yearly cash inflows 1
Present Value of $1: 10% 1 0.909 2 0.826 3 0.751 4 0.683 5 0.621 11% 0.901 0.812 0.731 0.659 0.593 12% 0.893 0.797 0.712 0.63
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Answer #1
Year Annual Cashn Flows
(A)
PVF @ 12%
(B)
Present Value of
Annual Cash inflows
(A x B )
1 $ 784,000 0.893 $ 700,112
2 $ 598,000 0.797 $ 476,606
3 $ 598,000 0.712 $ 425,776
4 $ 598,000 0.636 $ 380,328
5 $ 784,000 0.567 $ 444,528
Total Present Value of Annual Cash inflows $ 2,427,350
Less: Amount Invested ($ 2,020,000)
Net Present Value of Project $ 407,350
Option (A) is Correct
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