Fimbrez Corporation has provided the following data concerningan investment project that it is considering:
Initialinvestment $220,000 Annual cash flow $129,000 per year Expected life of theproject 4 years Discount rate 9%
Click here to view Exhibit 13B-1and Exhibit 13B-2, to determine the appropriate discount factor(s)using table. The net present value of the project is closest to
A.$197,831
B.$220,000
C.$(91,000)
D.$(197,831)
Fimbrez Corporation has provided the following data concerningan investment project that it is considering:
| Initialinvestment | $220,000 | |
| Annual cash flow | $129,000 | per year |
| Expected life of theproject | 4 | years |
| Discount rate | 9% |
| Click here to view Exhibit 13B-1and Exhibit 13B-2, to determine the appropriate discount factor(s)using table. |
| The net present value of the project is closest to A.$197,831 B.$220,000 C.$(91,000) D.$(197,831) |
Related questions
1
(Ignore income taxes in this problem.) The following datapertain to an investment proposal:
| Cost ofthe investment | $34,000 |
| Annual costsavings | $10,000 |
| Estimated salvagevalue | $5,000 |
| Life of theproject | 5years |
| Discount rate | 11% |
| Click here to view Exhibit 13B-1and Exhibit 13B-2, to determine the appropriate discount factor(s)using table. |
The net present value of the proposed investment is closest to:(Round discount factor(s) to 3 decimal places, intermediateand final answers to the nearest dollar amount.) |
$2,965
$19,000
$5,925
$2,960
(Ignore income taxes in this problem.) The following datapertain to an investment proposal:
| Cost of the investment | $32,000 |
| Annual cost savings | $9,000 |
| Estimated salvagevalue | $3,000 |
| Life of the project | 5 years |
| Discount rate | 10% |
| Click here to view Exhibit 13B-1 and Exhibit 13B-2, todetermine the appropriate discount factor(s) using table. |
The net present value of the proposed investment is closest to:(Round discount factor(s) to 3 decimal places, intermediateand final answers to the nearest dollar amount.) |
$3,982
$2,119
$1,863
$20,000
Oakmont Company has an opportunity to manufacture and sell a newproduct for a four-year period. The companyâs discount rate is 18%.After careful study, Oakmont estimated the following costs andrevenues for the new product: |
| Cost ofequipment needed | $ | 270,000 | |
| Workingcapital needed | $ | 90,000 | |
| Overhaul of the equipment in two years | $ | 9,000 | |
| Salvagevalue of the equipment in four years | $ | 14,500 | |
| Annualrevenues and costs: | |||
| Salesrevenues | $ | 450,000 | |
| Variable expenses | $ | 220,000 | |
| Fixedout-of-pocket operating costs | $ | 90,000 | |
When the project concludes in four years the working capitalwill be released for investment elsewhere within the company. |
| Click here to view Exhibit 13B-1and Exhibit 13B-2, to determine the appropriate discount factor(s)using tables. |
| Required: | |
Calculate the net present value of this investment opportunity.(Round discount factor(s) to 3 decimalplaces.) |
