An investment that costs $50,000 will return $15,000 operating cash flows per year for five years. Determine

Question:

An investment that costs $50,000 will return $15,000 operating cash flows per year for five years. Determine the net present value of the investment if the required rate of return is 14 percent. Should the investment be undertaken? (Your answer might be slightly different due to rounding. Select the best answer from those available.)

A. Yes, the profit is $25,000.

B. No, the accounting return is less than 14%.

C. No, the net present value is negative at $11,045.

D. Yes, the net present value is positive at $1,496.50.


Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Managerial Accounting for Managers

ISBN: 978-1259578540

4th edition

Authors: Eric Noreen, Peter Brewer, Ray Garrison

Question Posted: