When an Accounts Payable department improves their information system resulting in faster payments to vendors, without the Accou
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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:
Step-3 Computation of NPV:
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:
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Answer:
22,290 units
Explanation:
Product A sales (S) = 21,900 units
Product A selling price = $11.90
Product A beggining inventory (I)= 3,900
Product A ending inventory (E) = 3,900 x 1.10 = 4,290
Budgeted purchases of product A must account for all of the projected sales and the desired ending inventory, assuming that the company already has a beginning inventory at hand. Budgeted Purchases of product A are given by: