Question
Brett Collins is reviewing his companys investment in a cement plant. The company paid $15,700,000 five years ago to acquire the plant. Now top management
Brett Collins is reviewing his companys investment in a cement plant. The company paid $15,700,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The companys discount rate for present value computations is 9 percent. Expected and actual cash flows follow: (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) ******** NEEP HELP WITH PART B PLEASE****
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||||
Expected | $ | 3,370,000 |
| $ | 5,060,000 |
| $ | 4,560,000 |
| $ | 5,060,000 |
| $ | 4,210,000 |
|
Actual |
| 2,690,000 |
|
| 2,990,000 |
|
| 4,890,000 |
|
| 3,880,000 |
|
| 3,590,000 |
|
Required
1. a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. (Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar.) ***** What is Part B**** *****Part A is correct*****
*****HINT: Present Value of $1.00 (PV of $1) for 9%********
1st Year = 0.917431
2nd Year= 0.841680
3rd Year= 0.772183
4th Year= 0.708425
5th Year= 0.649931
*****HINT: Present Value of an Annuity of $1.00 (PVA of $1) for 9%******
1st Year = 0.917431
2nd Year= 1.759111
3rd Year= 2.531295
4th Year= 3.239720
5th Year= 3.889651
Net present value (expected) | $1,492,643 |
Net present value (actual) | ????????? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started