Question
Beyer Company is considering the purchase of an asset for $190,000. It is expected to produce the following net cash flows. The cash flows occur
Beyer Company is considering the purchase of an asset for $190,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 15% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Total | ||||||||||||||||||
Net cash flows |
| $ | 78,000 |
|
| $ | 46,000 |
|
| $ | 84,000 |
|
| $ | 169,000 |
|
| $ | 53,000 |
|
| $ | 430,000 |
|
a. Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)
year | Net cash flows | Present value of 1 at 15% | Present value of net cash flows |
1 |
|
|
|
2 |
|
|
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3 |
|
|
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4 |
|
|
|
5 |
|
|
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totals |
|
|
|
Amount invested |
|
|
|
Net present value |
|
|
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b. Should Beyer accept the investment?
Yes
No
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