Question

# Beyer Company is considering the purchase of an asset for \$225,000. It is expected to produce...

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

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.

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