Question

10 points Question 8 Save Answer Siegmeyer Corp. is considering a new inventory system that will cost $750,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year one, $325,000 in year two, $150,000 in year three, and $180,000 in year four. Siegmeyer's required rate of return is 8%. Based on the NPV calculated previously, Siegmeyer should the project because its NPV is greater than Accept; zero Reject; zero Accept; one Reject; one

Answer 1

Hi, As per the HOMEWORKLIB RULES, in case of multiple questions, I need to solve the first question.

The NPV is computed as shown below:

= Initial investment + Present value of future cash flows

Present value is computed as follows:

= Future value / (1 + r)ⁿ

So, the NPV is computed as follows:

= - $ 750,000 + $ 350,000 / 1.08 + $ 325,000 / 1.08² + $ 150,000 / 1.08³ + $ 180,000 / 1.08⁴

= $ 104,089.40 Approximately

The firm should accept the project since the NPV is greater than zero.

I request you to please post remaining questions separately, since as per the guidelines in case of multiple questions, I need to solve the first question.

Feel free to ask in case of any query relating to this question