Question 2 (of 6) value: 16.66 point:s Peng Company is considering an investment

Question

Question 2 (of 6) value: 16.66 point:s Peng Company is considering an investment expected to generate an average net income after taxes of $2,800 for three years. The investment costs $46,200 and has an estimated $9,000 salvage value. Assume Peng requires a 10% return on its investments. Compute the net present value of this investment. (EVof $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) (Negative amounts should be indicated by a minus sign.) Amountx PV Factor Present Value Cash Flow Annual cash flow Residual value Select Chart Net present value

Explanation / Answer

Cash flow Select chart Amt PV Factor Present value Annual cash flow Present value of an Annuity 1 (PVIFA(I,n) 15200 2.4869 37801 Residual value Present value of 1 (PVIF(I,n))) 9000 0.7513 6762 Present value of cash flow 44563 Immediate cash outflow/Initial Investment 46200 NPV -1637 annual cash flow SLM (46200-9000)/3 12400 Net Income 2800 Annual cash flow 15200 If any doubt please comment

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