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irina [24]
3 years ago
14

Net present value LO P3 Beyer Company is considering the purchase of an asset for $250,000. It is expected to produce the follow

ing net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 12% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1)
Year 1 Year 2 Year 3 Year 4 Year 5 Total
Net cash flows $83,000 $43,000 $76,000 $127,000 $49,000 $378,000

Required:
a. Compute the net present value of this investment.
b. Should Beyer accept the investment?
Business
2 answers:
Marysya12 [62]3 years ago
8 0

Answer:

$20,996.49

Yes

Explanation:

Net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be found using a financial calculator.

Cash flow in year 0 = $-250,000

Cash flow in year 1 = $83,000

Cash flow in year 2 = $43,000

Cash flow in year 3 = $76,000

Cash flow in year 4 = $127,000

Cash flow in year 5 = $49,000

I = 12%

NPV = $20,996.49

The company should accept the project because the NPV is postive.

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

irakobra [83]3 years ago
3 0

Answer:

a. NPV = $20,996

b. Beyer should accept the investment

Explanation:

Net Present Value is Calculated by Taking the Present Day (discounted) value of all future net cash flow based on the Business Cost of Capital and Subtracting the Initial Cost of the Investment.

Accept only Project that give a Positive Net Present Value.

Using a financial Calculator the Net Present Value computations will be as follows :

CF0 = ($250,000)

CF0 = $83,000

CF0 = $43,000

CF0 = $76,000

CF0 = $127,000

CF0 = $49,000

i = 12%

NPV = ?

NPV = $20,996

<u>Conclusion</u>

Beyer should accept the investment since it gives a positive Net Present Value

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The accept-or-reject rule, using the IRR method, is to acceptthe project if its Internal Rate of Return (IRR) is higher than theWeighted Average Cost of Capital(k) [r>k]. The project shall berejected if its internal rate of return is e lower than theWeighted Average Cost of Capital cost of (r<k)

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The projects should be accepted as the rate of return on theproject is higher than the WACC(10.8%) which means that theprojects will be profitable as the returns are higher than the costof the project (capital).  Considering this projects E,F and G should NOT be considered.

And considering the sizes the Optimal Capital  is $5,750,000 (the addition of sizes of all projects)

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Answer:

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3 years ago
Several market participants interact in developed markets to organize the exchange of funds from buyers to sellers. Such institu
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Answer:

1. Commercial banks

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Explanation:

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Life insurance companies

The life insurance companies are financial institutions that provide lump sums otherwise known as death benefits to beneficiaries  of their policy holders upon their demise, provided that premium is paid on regular basis.

Mutual fund

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4 0
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Answer:

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