1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
azamat
2 years ago
9

A corporation makes an investment of $20,000 that will provide the following cash flows after the corresponding amounts of time:

Year 1 - $10,000 Year 2 - $10,000 Year 3 - $2,000 a. Should the company make this investment? b. What is the net present value at a 7 percent discount rate? Round your answer to two decimal points.
Business
1 answer:
s344n2d4d5 [400]2 years ago
5 0

A) The company should not invest in the provided project due to the negative NPV of the project.

B) The NPV of the project comes out to be (286).

<h3>What is NPV?</h3>

NPV is an abbreviated form of Net present value and computed by deducting the cash outflows from cash inflows at the present value.

Given values:

Cash flow of year 1: $10,000

Cash flow of year 2: $10,000

Cash flow of year 3: $2,000

Cash outflow (cost of investment) =$20,000

Step-1 Computation of PV of cash inflows of every year:

PV of year 1 = Cash inflow of year 1 / (1+ interest rate)^ 1

                    = $10,000 / (1+0.07) ^ 1

                    = $10,000 X 0.934579

                    = $9,346

PV of year 2 = Cash inflow of year 1 / (1+ interest rate)^ 2

                    = $10,000 / (1+0.07) ^ 2

                    = $10,000 X 0.873438

                    = $8,735

PV of year 3= Cash inflow of year 1 / (1+ interest rate)^ 3

                   = $2,000 / (1+0.07) ^ 2

                    = $2,000 X 0.816297

                    =$1,633

Step-2 Computation of total amount of PV of cash inflows:

\rm\ PV \rm\ of \rm\ cash \rm\ inflows = \rm\ PV \rm\  of \rm\  year \rm\  1 + \rm\  PV \rm\ of \rm\ year \rm\ 2 + \rm\ PV \rm\ of \rm\ year \rm\ 3\\\rm\ PV \rm\ of \rm\ cash \rm\ inflows =\$9,346 + \$8,735 + \$1,633\\\rm\ PV \rm\ of \rm\ cash \rm\ inflows =\$19,714

Step-3 Computation of NPV:

\rm\ NPV=\rm\ PV \rm\ of \rm\ cash \rm\ inflows- \rm\ Cost \rm\ of \rm\ investment\\\rm\ NPV=\$19,714-\$20,000\\\rm\ NPV=\$ (286)

Therefore, the NPV comes out to be a negative amount of 286, and hence, the company should not accept the project.

Learn more about the net present value in the related link:

brainly.com/question/14015430

#SPJ1

You might be interested in
Why do you think people have taken the risk and invested in overseas companies? What are the pros and cons of doing this?
dem82 [27]

Why do you think people have taken the risk and invested in overseas companies? What are the pros and cons of doing this? Investing in overseas companies is good because it gives better openings because of the vast amount of countries in the world. It also gives one influence socially in other countries.

4 0
2 years ago
Garret is an undergraduate looking for a job to pay for college. As Garret seeks employment, he is glad to know that he will be
bogdanovich [222]

Answer:

Price floor.

Explanation:

Price floor is perfect fit in the scenario given. As price floor is the legal minimum price fixed by government to protect the right of labor or work force from getting expolited at lower price, which will not fulfill the basic need of labor. It vary according to the region or place, such as rural or urban, depending on the cost of living in the region. It help the economy to have growth with equity.

5 0
3 years ago
Xavier Co. wants to purchase a machine for $37,900 with a four year life and a $1,000 salvage value. Xavier requires an 8% retur
ale4655 [162]

Answer:

Net present value of machine is $5,561

Explanation:

Net present value is the method of calculating net of cash inflows and outflows in present value term using discounting of the cash flow by required rate of return.

Net Present Value of the machine is $5,561

All the calculation and workings are attached with this question please find it.  

5 0
3 years ago
member of the production team skilled in research and analysis, who helps actors, designers, and directors better understand the
monitta

Answer:

Dramaturg

Explanation:

Dramaturg is the term which is defined as the editor or the literary adviser in the film company, theatre or opera, who researches, texts, selects, interprets scripts and printed programmes, does the public relations work.

So, in this case, the member of the production team who helps the directors, actors as well designers to better understand the specifications of the play is referred to the Dramaturg.

4 0
3 years ago
Big Time Widgets has the following inventory data: December 1 Beginning inventory of 15 units at $6.00 per unit December 7 Purch
kolbaska11 [484]

Answer:

Cost of goods sold on a LIFO basis for December = $409.50

If periodic inventory system is followed then, there is no proper weekly record, proper record is missing and therefore, average method is followed, in that case usage of LIFO or FIFO is not suggested.

Explanation:

As per LIFO method, we have Last In First Out which means the item which is last added in inventory will be sold first.

In the given instance we have things as following:

1 December       opening      15 units         $6.00 per unit           $90.00

7 December      purchased   50 units       $6.60 per unit           $330.00

12 December     Sales           45 units        $6.60 per unit           $297.00

Balance after sales

15 units @ $6.00 per unit = $90.00

5 units @ $6.60 per unit = $33.00

20 December    Purchased  30 units      $7.50 per unit              $225

29 December    Sales          15 units        $7.50 per unit              $112.5

Balance

15 units @ $6.00 per unit = $90.00

5 units @ $6.60 per unit = $33.00

15 units @ $7.50 per unit = $112.50

As stated above, under LIFO we have Last In First Out

Cost of goods sold

12 December     Sales           45 units        $6.60 per unit           $297.00

29 December    Sales           15 units        $7.50 per unit              $112.5

Total cost of goods sold in December = $297 + $112.5 = $409.5

In case periodic inventory system had been used then,

no proper record is maintained, for cost at which the goods are acquired, and therefore average method is followed, since no proper cost record is maintained.

Final Answer

Cost of goods sold on a LIFO basis for December = $409.50

If periodic inventory system is followed then, there is no proper weekly record, proper record is missing and therefore, average method is followed, in that case usage of LIFO or FIFO is not suggested.

8 0
2 years ago
Other questions:
  • If congress increases the minimum wage to $7.25 per hour, what happens to the demand for consumer goods as a result?
    15·2 answers
  • Events that occur after the December 31, 2021 balance sheet date, but before the balance sheet is issued, and provide additional
    6·1 answer
  • So, I got a job two weeks ago and I'm a minor. I don't have a work permit. Is a permit necessary to get paid? I haven't been ask
    5·2 answers
  • Mary is 40 years old, plans to retire at 65 and the actuarial tables tell her she can expect to live until 80. The market value
    10·1 answer
  • As an economist working at the International Monetary Fund, you are given the following data for Burundi: observed per capita GD
    11·1 answer
  • An increase in price causes an increase in total revenue when demand is
    5·1 answer
  • Businesses employ workers from city neighborhoods and rural areas. These workers are perfect substitutes and cannot relocate in
    5·1 answer
  • If a firm with a positive net worth is operating its fixed assets at full capacity, if its dividend payout ratio is 100%, and if
    9·1 answer
  • List and explain various needs of a business for which funds are required​
    8·1 answer
  • what do risk managers need to do to help their company successfully launch a new product ? (is the new product going to be a WIN
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!