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Marina CMI [18]
3 years ago
5

A company is evaluating an investment which has an initial investment of $15,000. Expected annual net cash flows over four years

is $5,000. The company would like to earn a 10% return on the investment. The present value of an annuity factor for 10% and 4 periods is 3.1699. The present value of $1 factor for 10% and 4 periods is 0.6830. The net present value is (round your answer to the nearest whole dollar).
Business
1 answer:
Elenna [48]3 years ago
7 0

Answer:

$850

Explanation:

Data provided in the question:

Initial investment = $15,000

Expected annual net cash flows over four years, R = $5,000

Return on the investment = 10% = 0.10

Present value of an annuity factor for 10% and 4 periods, PVAF = 3.1699

The present value of $1 factor for 10% and 4 periods = 0.6830

Now,

Net present value = [ R × PVAF ] - Initial investment

= [ $5,000 × 3.1699 ] - $ 15,000

= $15,849.50 - $ 15000

= $849.50 ≈ $850

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OPTION A        

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Pluto Company owns 80 percent of the common stock of Star Corporation. During the year, Pluto reported sales of $1,000,000, and
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3 years ago
Compute the weight of common equity that should be used in the firm's WACC calculation if the market value of the firm's debt is
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Answer:

0.62 or 62 %

Explanation:

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