Wayne Company is considering a long-term investment project called ZIP. ZIP will
ID: 2471821 • Letter: W
Question
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $133,576. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,600, and annual cash outflows would increase by $38,000. The company’s required rate of return is 10%. Click here to view PV table.
Calculate the net present value on this project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Net present value?
Whether this project should be accepted?
The project should be?
Explanation / Answer
Statement showing Cash flows Particulars Time PVf@10% Amount PV Cash Outflows - 1.00 (133,576.00) (133,576.00) PV of Cash outflows = PVCO (133,576.00) Cash inflows =80,600 - 38,000 1.00 0.9091 42,600.00 38,727.27 Cash inflows =80,600 - 38,000 2.00 0.8264 42,600.00 35,206.61 Cash inflows =80,600 - 38,000 3.00 0.7513 42,600.00 32,006.01 Cash inflows =80,600 - 38,000 4.00 0.6830 42,600.00 29,096.37 PV of Cash Inflows =PVCI 135,036.27 NPV= PVCI - PVCO 1,460.27 The project should be accepted Time PVF@10% 1 0.9091 2 0.8264 3 0.7513 4 0.6830
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