Falcon Crest Aces (FCA), Inc., is considering the purchase of a small plane to u

Question

Falcon Crest Aces (FCA), Inc., is considering the purchase of a small plane to use in its wing-walking demonstrations and aerial tour business. Various information about the proposed investment follows:     

Assume straight line depreciation method is used.

4. Recalculate FCA's NPV assuming the cost of capital is 3% percent. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar amount.)

    

Initial investment $ 290,000 Useful life $ 10 years Salvage value 25,000 Annual net income generated $ 6,400 FCA's cost of capital 9 %

Explanation / Answer

Net present value = Present value of cash inflow-Present value of cash outflow

Annual cash inflow = 6400+(290000-25000/10) = 32900

Net present value = (32900*8.53020+25000*0.74409)-290000

Net present value = 9246

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.