Question

Beyer Company is considering the purchase of an asset for $225,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 15% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

	Year 1				Year 2				Year 3				Year 4				Year 5				Total
Net cash flows		$	76,000			$	55,000			$	94,000			$	159,000			$	47,000			$	431,000

a. Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)
  

b. Should Beyer accept the investment?
  

• Yes

• No

Answer 1

solution:

initial investment $225'000.00

I= 15%

year    net cash flow    *present value of 1 at 15% =present value of net cash flows

1    $ 76,000.00 0.86957    $66,087

2    $ 42,000.00    0.75614    $31,758

3    $ 99,000.00 0.65752    $65,094

4    $ 142,000.00    0.57175    $81,189

5 $ 48,000.00 0.49718    $23,864

total    $267,996

amount invested $225,000

net present value    $42,993

The Final answer may shift to 1 or 2 digits because of adjusting off. I have taken Present esteem factor for 5 decimal spots.

PART B.

Truly, Beyer ought to acknowledge the undertaking

Since present estimation of venture is certain the task is worth acknowledgment and ought to be acknowledged.

THANK YOU.