5) Citrus Company is considering a project that has estimated annual net cash fl
ID: 2580964 • Letter: 5
Question
5) Citrus Company is considering a project that has estimated annual net cash flows of $23,430 for four years and is estimated to cost $110,000. Citrus’s cost of capital is 6 percent.
Determine the net present value of the project. (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. Negative amount should be indicated by a minus sign. Round your final answer to 2 decimal places.)
6) Vaughn Company has the following information about a potential capital investment:
1. Calculate the net present value of this project. (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 the final answer to nearest whole dollar.)
6) Vaughn Company has the following information about a potential capital investment:
1. Calculate the net present value of this project. (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 the final answer to nearest whole dollar.)
Explanation / Answer
(5)
Cost of Capital = 6%
Initial Cash Outflow = $110,000
Annual Cash Inflow = $23,430 for 4 Years
Present Value of Annuity (PVAF) @6% for 4 Years = 3.465
Net Present Value = Present Value of Annual Cash Inflow – Initial Cash Outflow
Present Value of Annual Cash Inflow = Annual Cash Inflow * PVAF @6% for 4 years
= $23,430 * 3.465
Present Value of Annual Cash Inflow = 81,184.95
NPV = 81,184.95 - $110,000
NPV = (28,815.05)
(6)
Cost of Capital = 15%
Initial Cash Outflow = $380,000
Annual Cash Inflow = $82,000 for 9 Years
Present Value of Annuity (PVAF) @15% for 9 Years = 4.772
Net Present Value = Present Value of Annual Cash Inflow – Initial Cash Outflow
Present Value of Annual Cash Inflow = Annual Cash Inflow * PVAF @15% for 9 Years
= $82,000 * 4.772
Present Value of Annual Cash Inflow = 391,304
NPV = $391,304- $380,000
NPV = 11,304
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