The following information relates to three independent investment decisions by B
ID: 2370923 • Letter: T
Question
The following information relates to three independent investment decisions by Buckle Enterprises, each with a 10-year life and no salvage value:
Using the present value tables in Exhibits 26-3 and 26-4, compute the missing information pertaining to each investment proposal. (Round "PV factors" to 3 decimal places and your final answers to the nearest dollar amount. Omit the "$" & "%" signs in your response.)
Using the present value tables in Exhibits 26-3 and 26-4, compute the missing information pertaining to each investment proposal. (Round "PV factors" to 3 decimal places and your final answers to the nearest dollar amount. Omit the "$" & "%" signs in your response.)
Explanation / Answer
for A
Net flows each year = 15000 - 6200 = 8800
investment cost = 8800/1.1 + ... 8800/1.1^10 = 54,072.19
for B
141250 = x/1.12 + .. x / 1.12^10
x = 24999.01
37000 - outflows = 24999.01
outflows = $12,000.99
for C
92598 = ( 20,000 - 6200 ) * ( 1/x + .... + 1/x^10 )
( 1/x - 1/x^11 )/ ( 1 - 1/x ) = 6.71
x = 1.08
Hence its 8%
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