The following data concern an investment project: Investment in equipment $110,000 Annual cash...
Question:
The following data concern an investment project:
| Investment in equipment | $110,000 |
| Annual cash inflows | $36,000 |
| Required upgrade at end of year 2 | $14,000 |
| Salvage value of the equipment | $10,000 |
| Working capital required | $50,000 |
| Life of the project | 4 years |
| Required rate of return | 8% |
The working capital will be released for use elsewhere at the conclusion of the project.
Compute the project's net present value.
Net Present Value:
To compute the net present value we subtract the cash outflows' present value from the cash inflows' present value. Any investment is feasible only if it has a positive net present value.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerComputation of net present value
| Year | PVF @ 8% | Amount | Present Value | |
|---|---|---|---|---|
| Cash Outflows | ... |
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
How to Calculate Net Present Value: Definition, Formula & Analysis
from
Chapter 5 / Lesson 20
19K
Learn about what net present value is, how it is calculated both for a lump sum and for a stream of income over multiple years. View some examples on NPV.
Related to this Question
- Overland Corporation has gathered the following data on a proposed investment project: Investment required in equipment $150,000 Annual cash inflow $40,000 Salvage value of equipment $0 Life of the investment 10 years Required rate of return 10% The comp
- Overland Corporation has gathered the following data on a proposed investment project: Investment required in equipment $150,000 Annual cash inflow $40,000 Salvage value of equipment $0 Life of the investment 10 years Required rate of return 10% The compa
- Chow Company has gathered the following data on a proposed investment project: Investment required in equipment $142,500 Annual cash inflows $30,000 Salvage value $0 Life of the investment 8 years Required rate of return 10% Required: a. What is
- Chow Company has gathered the following data on a proposed investment project: Investment required in equipment...$142,500 Annual cash inflows........$30,000 Salvage value.....$0 Life of the inves
- Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment $240,000 Annual cash inflows $50,000 Salvage value $0 Life of the investment 8 years
- Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment $240,000 Annual cash inflows $50,000 Salvage value $0 Life of the investment 8 year
- Overland Corporation has gathered the following data on a proposed investment project: Investment required in equipment $150,000 Annual Cash inflows $40,000 Salvage value of equipment $0 Life of the
- Overland Corporation has gathered the following data on a proposed investment project: Investment required in equipment $650,000 Annual cash inflows $66,000 Salvage value of equipment 0 Life of the
- Inocencio Corporation has provided the following information concerning a capital budgeting project: Tax rate 35% Expected life of the project 4 Investment required in equipment $270,000 Salvage value of equipment $0 Annual sales $755,000 Annual cash oper
- Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $30,000 Annual cash inflows $6,000 Salvage value of equipment $0 Life of the investment 15years Required rate of r
- Erling Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $280,000 Expected life of the project 4 Salvage value of equipment $0 Annual sales $720,000 Annual cash operating expens
- Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment $610,000 Annual cash inflows $88,000 Salvage value $0 Life of the investment 16 years Required rate of return 10% The company uses straigh
- Chow Company has gathered the following data on a proposed investment project: Investment required in equipment $143,500 Annual cash inflows $31,000 Salvage value $0 Life of the investment 8 years Required rate of return 10% The internal rate of return on
- Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment: $240,000 Annual cash inflows: $50,000 Salvage value: $0 Life of the investment: 8 y
- Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment $680,000 Annual cash inflows $66,000 Salvage value $0 Life of the investment 20 years The required rate of return 7% The company uses strai
- Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment $410,000 Annual cash inflows $60,000 Salvage value $0 Life of the investment 16 years Required rate of return 9% The company uses straight
- Slick Company is considering a capital project involving a $225,000 investment in machinery and a $45,000 investment in working capital. The machine has an expected useful life of 10 years and no salvage value. The annual cash inflows (before taxes) are e
- Sader Corporation is considering a capital budgeting project that would require an investment of $160,000 in equipment with a 4-year expected life and zero salvage value. Annual incremental sales will be $420,000 and annual incremental cash operating expe
- Jarvey Company is studying a project that would have a ten-year life and would require a $450,000 investment in equipment that has no salvage value. The project would provide net income each year as follows for the life of the project: Sales $500,000 Le
- The project requires an initial investment of $300,000 on equipment and is depreciated over 6 years. Working capital increased $18,000 at the beginning of the project and will be recovered in full at the end of year 4. The equipment will be sold at its bo
- A project requires an immediate investment of $64,726 in some new equipment with an estimated useful life of 10 years and no salvage value. If predicted annual savings or cash operating expenses are $11,213, what is the accounting rate of return based on
- A project requires an immediate investment of $68,629 in some new equipment with an estimated useful life of 10 years and no salvage value. If predicted annual savings or cash operating expenses are $14,555, what is the accounting rate of return based on
- 1. The following data pertains to an investment proposal: Required equipment investment $124,000 Annual cost savings $52,000 Projected life of investment 4 years Projected salvage value $0 Required ra
- Folino Corporation is considering a capital budgeting project that would require investing $120,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $380,000 and annual incremental cash operating expe
- Stepnoski Corporation is considering a capital budgeting project that would involve investing $216,000 in equipment with an estimated useful life of 4 years and no salvage value at the end of the useful life. Annual incremental sales from the project woul
- Pont Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $160,000 Expected life of the project 4 Salvage value of equipment $0
- Oriental Company has gathered the following data on a proposed investment project: Investment in depreciable equipment $600,000 Annual net cash flows $50,000 Life of the equipment 20 years Salvage value $0 Discount rate 14.00% The company uses straight-li
- Leamon Corporation is considering a capital budgeting project that would require an investment of $200,000 in equipment with a 4-year useful life and zero salvage value. The annual incremental sales would be $640,000 and the annual incremental cash operat
- Leamon Corporation is considering a capital budgeting project that would require an investment of $190,000 in equipment with a 4-year useful life and zero salvage value. The annual incremental sales would be $690,000 and the annual incremental cash operat
- Leamon Corporation is considering a capital budgeting project that would require an investment of $240,000 in equipment with a 4-year useful life and zero salvage value. The annual incremental sales would be $630,000 and the annual incremental cash operat
- Shinabery Corporation has provided the following information concerning a capital budgeting project: The investment required in equipment $40,000 Expected life of the project 4 Salvage value of equip
- Everest Company has the opportunity to invest in one of two projects: -Project A requires $500,000 investment for new machinery with a 4-year life and no salvage value. -Project B requires $500,000 investment for new machinery with a 3-year life and no
- The following data concerns a proposed equipment purchase: | Cost | $145,900 | Salvage value | $4,100 | Estimated useful life | 4 years | Annual net cash flows | $46,200 | Depreciation method | Straight-line The annual average investment amount used to
- The following data pertains to an investment proposal: Required equipment investment $124,000 Annual cost savings $52,000 Projected life of investment 4 years Projected salvage value $0 Required r
- Erling Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $280,000 Expected life of the project 4 Salvage value of equipment $0
- Tranter, Inc., is considering a project that would have a nine-year life and would require a $4,004,000 investment in equipment. At the end of nine years, the project would terminate and the equipment would have no salvage value. The project would provide
- Oriental Corporation has gathered the following data on a proposed investment project: Investment in depreciable equipment $450,000; Annual net cash flows $90,000; Life of the equipment 10 years; Salvage value $0; Discount rate 7%. The company uses straig
- Shinabery Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment - $40,000 ; Expected life of the project - 4 ; Salvage value o
- Nakama Corporation is considering investing in a project that would have a 4-year expected useful life. The company would need to invest $160,000 in equipment that will have zero salvage value at the end of the project. Annual incremental sales would be $
- Jonathon Company is considering an investment in the project below: Project 1 cost $10,000 Annual cash operating savings (end of year) $3,000 Terminal salvage $0 Useful life in years 5 Required rate of return 10% What is the lowest level of annual cash o
- Cost of equipment needed $60,000 Working capital needed $100,000 Overhaul of equipment in four years $5,000 Salvage value of the equipment in five years $10,000 Annual revenues and costs: Sales revenues $200,000 Cost of goods sold $125,000 Out-of-pocket o
- Cardinal Company is considering a five-year project that would require a $2,955,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each o
- Gutshall Corporation is considering a capital budgeting project that would involve investing $160,000 in equipment with an estimated useful life of 4 years and no salvage value at the end of the useful life. Annual incremental sales from the project would
- The following data concerns a proposed equipment purchase: Cost - $159,200 Salvage value - $4,800 Estimated useful life - 4 years Annual net cash flows - $46,900 Depreciation method - Straight-line The annual average investment amount used to calcul
- A project requires an immediate investment of $65,028 in some new equipment with an estimated useful life of 10 years and no salvage value. If predicted annual savings or cash operating expenses are $
- A project requires an immediate investment of $51,376 in some new equipment with an estimated useful life of 10 years and no salvage value. If predicted annual savings or cash operating expenses are
- A project requires an immediate investment of $68731 in some new equipment with an estimated useful life of 10 years and no salvage value. If predicted annual savings or cash operating expenses are $1
- Data Example E Cost of equipment needed $300,000 Working capital needed $45,000 Overhaul of equipment in four years $30,000 Salvage value of the equipment in five years $40,000 Annual revenues and c
- Benaflek Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was ($2,186). Annual cost savings were: $16,746 for year 1; $18,434 for year 2; and $16,036 for year 3. The amount of
- Cardinal Company is considering a project that would require a $2,810,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $500,000. Th
- Cardinal Company is considering a project that would require a $2,782,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $200,000. Th
- Review each scenario and fill out the required information. Show your solution. 1. Project A requires a $440,000 initial investment for new machinery with a five-year life and a salvage value of $48,5
- Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income for every
- Project A requires a $400,000 initial investment for new machinery with a five-year life and a salvage value of $37,500. The company uses straight-line depreciation. Project A is expected to yield annual net income of $29,000 per year for the next five ye
- Valesano Company is considering a project with the following information: Project 1 Cost $4,000 Annual cash operating savings (end of year) $2,000 Terminal salvage $0 Useful life in years 3 Required r
- Laurman, Inc. is considering investing in a new project. Use the following information to answer the questions below: Required investment in equipment $2,205,000 Project life 7 years Salvage value $22
- (1) The following data concerns a proposed equipment purchase: Cost $144,000 Salvage value $4,000 Estimated useful life 4 years Annual net cash flows $46,100 Depreciation method Straight-line. The a
- Way Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows woul
- The following data concerns proposed equipment... The following data concerns a proposed equipment purchase: Cost $156000 Salvage value $4,500 Estimated useful life 4 years Annual net cash flows $5
- Thornley Machines is considering a 3-year project with an initial cost for fixed assets of $618,000. The project will reduce operating costs by $265,000 a year. The equipment will be depreciated straight-line to a zero book value over the life of the proj
- The following data concerns a proposed equipment purchase: Cost $136,400 Salvage value $3,600 Estimated useful life 4 years Annual net cash flows $45,700 Depreciation method Straight-line The annual average investment amount used to calculate the accounti
- Equipment has a 10-year life without salvage value. It has been in use for four years. The building has a 40-year life without salvage value and has been in use for four years. Both are depreciated on a straight-line basis. Use this information to prepare
- Cardinal Company is considering a five-year project that would require a $2,870,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. T
- Cardinal Company is considering a five year project that would require a $2,500,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. T
- Cardinal Company is considering a five-year project that would require a $2,750,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. T
- Cardinal Company is considering a five-year project that would require a $2,765,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%.
- Cardinal Company is considering a five-year project that would require a $2.915,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 16%. T
- Cardinal Company is considering a five-year project that would require a $2,945,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. T
- Cardinal Company is considering a five-year project that would require a $3,025,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 16%. T
- Sasson, Inc. is considering a project that would have a ten-year life and would require a $2,000,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net
- The following data concerns a proposed equipment purchase: Cost $125,000 Salvage value $3,000 Estimated useful life 4 years Annual net cash flows $45,100 Depreciation method Straight-line The annual a
- The following data concerns a proposed equipment purchase: Cost $151,600 Salvage value $4,400 Estimated useful life 4 years Annual net cash flows $46,500 Depreciation method Straight-line The annual a
- Gutshall Corporation is considering a capital budgeting project that would involve investing $236,000 in equipment with an estimated useful life of 4 years and no salvage value at the end of the usefu
- Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows would
- Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $119,200. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $79,240, and annual cash outflows would
- Foucault Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $240,000 ; Expected life of the project 4 ; Salvage value o
- A company projects an increase in net income of $90,000 each year for the next five years if it invests $450,000 in new equipment. The equipment has a five-year life and an estimated salvage value of $150,000. What is the annual rate of return on this inv
- A company projects an increase in net income of $153,000 each year for the next five years if it invests $900,000 in new equipment. The equipment has a 5-year life and an estimated salvage value of $300,000. What is the annual rate of return on this inves
- Kamila Company is considering whether to invest in a piece of equipment that requires an investment of $40,000 today. The project will provide net cash inflows of $10,000 at the end of each year for five years, and it will have a salvage value of $12,000
- Nolan Co. purchased some equipment 3 years ago. The company's required rate of return is 4%, and the net present value of the project was $1,485. Annual cost savings were: $25,678 each year for years 1-3. The amount of the initial investment was [{Blank}
- The following data concerns a proposed equipment purchase: Cost$145,900 Salvage value$4,100 Estimated useful life4 years Annual net cash flows$46,200 Depreciation methodStraight-line The annual av
- The following data concerns a proposed equipment purchase: Cost $161,100 Salvage value $4,900 Estimated useful life 4 years Annual net cash flows $47,000 Depreciation method Straight-line The annual average investment amount used to calculate the accounti
- Cardinal Company is considering a five-year project that would require a $2,800,000 investment in equipment with a useful life of five years and no salvage value. The company?s discount rate is 14%. T
- Project A has a first cost of $3,500, annual operating and maintenance costs of $1,900, annual savings of $2,300, and a salvage value of $1,800 at the end of its 5 year useful life. Project B has a f
- Assume an investment project that has 250,000 dollars of capital cost for purchasing some machines and 150,000 dollars for buying a piece of land at time zero. The project life time is 8 years. This i
- Project A requires a $280,000 initial investment for new machinery with a five year life and a salvage value of $30,000. The company uses straight-line method of depreciation. Project A is expected to
- Woods Company is considering the purchase of some equipment. The initial investment will be $100,000. The estimated useful life of the equipment will be 5 years, at which point it will have a zero terminal salvage value. The annual savings in cash operati
- The following data concerns a proposed equipment purchase: Cost $558,000 Salvage value $3,000 Estimated useful life 5 years Annual net cash flows $18,000 Depreciation method Straight-line Assumi
- Bought a piece of equipment costing $110,000, with a salvage value of $10,000 and a useful life of 10 years. After 5 years, it was discovered that the salvage value will be $5,000 and the remaining useful life is only 2 years. What is the new depreciation
- Paris Ltd is considering the purchase of a new equipment. The following data are available for this project: \\ Equipment cost: $20,000 Estimated life: 5 years Estimated residual value: $2,000 Annual net cash flow: $6,000 Required rate of return: 10%
- A proposed investment has an equipment cost of $800. It will have a life of 3 years. The cost will be depreciated straight-line to a zero salvage value, but will have a market worth $463 at the end of
- Pleasant Company has an opportunity to invest in one of two new projects. Project Y requires a $700,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $700,000 investment for new machinery with a three-year l
- Tranter, Inc., is considering a project that would have a five-year life and would require a $750,000 investment in equipment. At the end of five years, the project would terminate and the equipment w
- Tranter, Inc is considering a project that would have a five-year life and would require a 2,400,000 investment in equipment. At the end of five years, the project would terminate and the equipment wo
- Tranter, Inc., is considering a project that would have a nine-year life and would require a $3,360,000 investment in equipment. At the end of nine years, the project would terminate and the equipment
- Tranter, Inc. is considering a project that would have a five-year life and would require a $600,000 investment in equipment. At the end of five years, the project would terminate and the equipment w
- Tranter, Inc., is considering a project that would have a ten-year life and would require a $1,500,000 investment in equipment. At the end of ten years, the project would terminate and the equipment w
- Tranter, Inc., is considering a project that would have a ten-year life and would require a $3,330,000 investment in equipment. At the end of ten years, the project would terminate and the equipment w
- Tranter, Inc., is considering a project that would have a ten-year life and would require a $1,806,000 investment in equipment. At the end of ten years, the project would terminate and the equipment w
- Tranter, Inc., is considering a project that would have a ten-year life and would require a $1,500,000 investment in equipment. At the end of ten years, the project would terminate and the equipment
Explore our homework questions and answers library
Browse
by subject