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

Homework Answers

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.

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