Beyer Company is considering the purchase of an asset for $225,000. It is expect

Question

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 12% return on its investments, evo SLEV os. P AofSL and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows $70,000 $59,000 $95,000 $140,000 $49,000 $413,000 a. Compute the net present value of this investment. (Round your answers to the nearest whole dollar.) Present Value Net Cash Flows Value of 1 at 12% of Net Cash Flows Year Totals Amount invested Net present value b. Should Beyer accept the investment? O Yes No

Explanation / Answer

b)

Since NPV is positive ,investment should be accepted

Yes.

year Net cash flow Present value at 12% Present value of net cash flow 1 70000 .89286 62500.2 2 59000 .79719 47034.21 3 95000 .71178 67619.1 4 140000 .63552 88972.8 5 49000 .56743 27804.07 Total 293930.38 Amount invested (225000) Net present value 68930

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