Answer: $13,573.03
Explanation:
The Net Present Value of a project refers to the present value of the Cash Outflows subtracted from the present value of Cash Inflows.
It helps to check the viability of a product to see if it should be embarked on.
Cash Outflow = $204,900 which is the initial investment
Cash Inflows = Present value of $31,200 paid every year as well as the Present Value of the Salvage value of $92,000
Present Value of $31,200 annually.
Since this is a constant cashflow, it can be treated as an Annuity.
To make the calculation of an annuity faster, there exist Present Value Annuity factors that can be Multiplied with the Amount to find the present value. I have attached a table showing it.
The PVIFA for a 7 year project with an 11% discount rate is,
= 4.712
Present Value of the Inflow is therefore,
= 31,200 * 4.712
= $147,014.4
Present value of the Salvage Value is
= 92,000 / ( 1 + 11%) ^ 7
= $44,312.57
The Net Present Value is therefore,
= 147,014.40 + 44,312.57 - 204,900
= -$13,573.03
Net Present Value is a loss of ($13,583.03).
Answer: Check attachment
Explanation:
A cash basis income statement is simply referred to as an income statement which contains revenues and expenditures for the company whereby cash has either being received or paid by the company.
For accrual basis income statement, revenue and expenditures are recorded when they're either earned or made.
Check the attachment for more analysis.
