Home Layout Tables Charts SmartArt Formala General . Arial AAlign% Coditna Style

Question

Home Layout Tables Charts SmartArt Formala General . Arial AAlign% Coditna Styles Actio Chandler Company purchased equipment for an initi Formatting 83 Net Present Value Extra Credt Chander Company purchased equipment for an intial cost of $85,000. Al the Sme of purchase the equipment was expected to have the following projected cash inflows. When the equipment reached e Annual Equipment Cash Inflows YearExpec 20 000 30,000 35,000 25,000 5,000 10,000 20,000 30,000 30,000 30,000 Assume Chandler's cost of capital a %. Assume tho equpment had a 5 yow uses-Be and eo expected savage value ncuded. Calouale the NPV expocted when the company purchased the a achieved based on the actual cash inows Was th asset and the NPV the equipment Year Projacted PW Factor 30,000 35,000 25,000 15.000 30,000 0,000 30.000 Total PV

Explanation / Answer

Computation of Net present value:

Year Expected Discount rate 8% PV of cash flows Actual PV of cash flows 1 $20000 0.926 $18520 $10000 $9260 2 $30000 0.857 $25710 $20000 $17140 3 $35000 0.794 $27790 $30000 $23820 4 $25000 0.735 $18375 $30000 $22050 5 $15000 0.680 $10200 $30000 $20400 Total PV of cash flows $100595 $92670 Initial investment ($85000) ($85000) Net present value $15595 $7670.

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

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