Question

51487 0879437 2 4 0123 2 789 22234568 0525 703 5 565 1153 925 5 2 2 11223 1 11122 12346791357 241 04 6875 2 7 iod 20- 01234567890 01234567890 20 TABLE 11.2A Present Value of $1 Periods 3.75% 0.9804 0.9612 0.9423 0.9238 0.9057 0.8880 0.8706 0.8535 0.8368 0.8203 0.6730 0.9709 0.9426 0.9151 0.8885 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.5537 0.9592 0.9201 0.8826 0.9524 0.9070 0.9259 0.8573 0.7938 0.7350 2 0.9290 0.9246 0.8890 0.8548 0.8219 0.7903 0.8900 0.8396 0.8734 0.8631 0.8319 0.8018 0.7728 0.7449 4 0.7130 0.6663 0.6227 0.5820 0.5439 0.5083 0.2584 0.8121 0.7790 0.7473 0.7835 0.7462 0.7107 0.7473 0.6651 0.6274 0.5919 0.5584 0.5835 0.7307 0.7026 0.6756 0.4564 0.6876 0.6595 0.4350 0.6920 0.4789 0.4632 0.2145 20 0.3769 9% 0.9174 0.8417 0.7722 0.7084 0.6499 0.8929 0.7972 0.7118 0.6355 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.9091 0.8850 0.8772 0.7695 0.6750 0.8333 0.8116 0.7312 0.6587 0.5935 0.5346 0.4817 0.4339 0.3909 0.3522 0.1240 0.6931 0.5787 0.5120 4 0.6830 0.4019 0.3349 0.2791 0.3277 0.5645 0.5132 0.4665 0.4241 0.3855 0.4803 0.4251 0.3762 0.4556 0.3996 0.3506 0.3075 0.2697 0.0728 0.5470 0.5019 0.4523 0.4039 0.1678 0.1342 0.1074 0.0115 0.2946 0.0868 0.2472 0.0611 0.4224 0.3220 20 0.0261 593 8 2 7 25 -2358-59532 5 12345780245 11123 9197 2 994 0247-6298 1234578013 40 2.1 2 3 5 7 9 2 6 05 7 3 2 5 2 2 136 417 1| 1 2 3 4 6 8 1 3 6 7 1234568913 36 9 2 4 9 6 5 7 2 0 30 12345689123 1 12346803691 5 533 578 983 2 7449 30 1234567902 - 1234680258 80 7774 2 4 13731 2 1. 2 3 4 5 6 7 9 0 29 1 12346802472 4 7 185 97817 1. 2 3 4 5 6 7 9 0 19 1 1234679146 0162954 7577 3 2 1234567801 6 1 12346791357 117345091 4 7 3 7 7 12345678904 12345791351 1115 2 1234567890 1234567890 TABLE 11.4A Present Value of Annuity of $1 Periods 0.9592 1.8794 2.7620 0.9259 1.7833 2.5771 3.3121 3.9927 4.6229 0.9804 0.9709 0.9639 0.9524 18594 2.7232 3.5460 4.3295 5.0757 5.7864 64632 0.9346 1.8080 2.6243 3.3872 4.1002 4.7665 5.3893 5.9713 2.8839 3.8077 2.6730 3.4651 2.7883 3.6514 4.4833 5.2851 6.0579 6.8028 2.7751 3.6299 4 4.4207 5.1997 5.9470 4.5797 5.6014 6.4720 7.3255 5.2421 6.0021 6.7327 6.2303 7.0197 7.7861 8.5302 14.8775 5.5824 6.2098 6.8017 7.3601 11.4699 5.7466 6.2469 8.9826 16.3514 8.2128 13.8962 7.3513 8.0109 13.2944 7.0236 10.5940 20 13.5903 12.4622 9.8181 Periods* 0.9174 2.5313 3.8897 0.9091 1.7355 2.4869 3.1699 3.7908 0.8550 1.6681 2.3612 2.9745 0.8772 1.6467 2.3216 0.8929 0.8333 1.5278 2.1065 2.5887 2.4018 3.0373 3.6048 2.2832 2.8550 3.3522 3.7845 4.1604 3 2.4437 3.6959 4.2305 4.7122 2.3616 2.6893 2.9514 3.9975 4.4226 4.7988 3.3255 3.8887 4.2883 4.6389 6 4.4859 4.5638 4.9676 5.3282 5.6502 3.8372 4.0310 4.1925 5.3349 5.5370 5.8892 7.9633 4.7716 5.0188 6.2593 3.3289 3.4631 3.5705 3.9539 5.9952 5.2161 5.4262 7.0248 20 8.5136 * There is one payment each period Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows Initial investment (2 limos) Useful life Salvage value Annual net income generated LLT's cost of capital $1,620,000 10 years $140,000 157,140 15% 3. Net present value. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Cash Outflows and negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount.) Table or Calculator Function Cash Outflow (Beginning of the Year) Present Value Table or Calculator Function Cash Inflow (for Next 10 Years) Table Factor Present Value Table or Calculator Function Cash Inlow(or 10th Year) Table Factor Present Value Total Net Present Value

Answer 1

Answer: Table or Calculator Function: Cash Outflow (Beginning of the Year)1620000 10 15% n= Present Value 1620000 PVA of $1 Table or Calculator Function: Cash Inflow (For next 10 Years) n= 305140 10 15% 5.0188 1531437 Table Factor Present Value Table or Calculator Function: Cash Inflow (For 10th Years n= PV of $1 140000 10 15% 0.2472 34608 Table Factor Present Value Total Net Present Value 53955

Initial Investment = $1,620,000
Salvage Value = $140,000
Useful Life = 10 years

Annual Depreciation = (Initial Investment - Salvage Value) / Useful Life
Annual Depreciation = ($1,620,000 - $140,000) / 10
Annual Depreciation = $148,000

Annual Net Cash Flow = Annual Net Income + Annual Depreciation
Annual Net Cash Flow = $157,140 + $148,000
Annual Net Cash Flow = $305,140