quillen compnay is performing a post-audit of a project completed one year ago.
ID: 2626952 • Letter: Q
Question
quillen compnay is performing a post-audit of a project completed one year ago. the initial estimates were that the project would cost $250,000, would have a useful life of 9 years, zero salvage value, and would result in net annual cash flows of $46,000 per year. now that the investment has been in operation for 1 year; revised figures indicate that it actually cost $260,000, will have a useful life of 11 years, and will produce net annual cash flows of $39,000 per year. evaluate the success of the project. assume a discount rate of 10%.
Explanation / Answer
to check success of the project
we have to check NPV
NPV = -260,000+39000*PVIFA(10,11) = -260,000+39000*6.4951 = -$6691.1
Project will be unsuccessful as its NPV is negative
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.