Payback period$40O,0005 980 000-5 years Hogan Company has gathered the following

Question

Payback period$40O,0005 980 000-5 years Hogan Company has gathered the following data on a proposed investment project. Discount rate Life of the investment Investment required in equipment Annual cash inflows Salvage value (Note that this is the same data that was provided for the previous question.) What is the 10% 10 years $400,000 80,000 A) $96,720 B) $80,000 VC) $91,600 D) $491,600 Feedback: The net present value of the proposed investment is determined as follows. 10% Present Years Elows Factor Value Cash Investment in equipment Now S400,000) 1.000 00,000) Annual net cash inflows 1-10 So.0006.145 421.600 Net present value The following data pertain to an investment that is being considered by the management of 10% Discount rate

Explanation / Answer

C. $91,600

Net present value = Present value of cash flows - Investment required in investment

Net present value = ($80,000 * 6.145) - $400,000

Net present value = $491,600 - $400,000

Net present value = $91,600

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