BW Help Tell me what you want to do EESTIS 44. Platoon Company is performing a post-audit of a project that was estimated to cost $420,000, have a useful life of 6 years with a zero salvage value, and result in net cash inflows of $100,000 per year. After the investment was in operation for a year, revised figures indicate that it actually cost $470,000, will have a 9-year useful life, and will produce net cash inflows of $77,000. The present value of an annuity of 1 for 6 years at 10% is 4.355 and for 9 years is 5.759. Instructions Determine whether the project should have been accepted based on (a) the original estimates and then on (b) the actual amounts. S AutoSave Of BS File Home Insert Draw Page Layout Formulas Data Review View Help F31 . X CDEF 1 44. Platoon Company is performing a post-audit of a project that was estimated 2 to cost $420,000, have a useful life of 6 years with a zero salvage value, and result 3 in net cash inflows of $100,000 per year. After the investment was in operation for 4 a year, revised figures indicate that it actually cost $470,000, will have a 9-year 5 useful life, and will produce net cash inflows of $77,000. The present value of an 6 annuity of 1 for 6 years at 10% is 4.355 and for 9 years is 5.759 7 Determine whether the project should have been accepted based on and then on 8 (a) the original estimates 9 Original Cash Flows $100,000 4.355 $435,500 10 Investment $420,000 1.000 $420,000 11 NPV $15,500 12 (b) the actual amounts. 13 Original Cash Flows $77,000 5.759 $443,443 14 Investment $470.000 1.000 $470,000 15 NPV ($26,557) 16 Rejected 18 Platoon should not have invested in the project based on the actual amounts, 19 since the net present value is negative. The decrease of $42,057 in net present 20 value was caused due to a decrease of $23,000 per year in net cash inflows and a 21 $50,000 increase in the cost of the capital investment. This more than offsets the 3- 22 year increase in useful life. 23 BW Help Tell me what you want to do EESTIS 44. Platoon Company is performing a post-audit of a project that was estimated to cost $420,000, have a useful life of 6 years with a zero salvage value, and result in net cash inflows of $100,000 per year. After the investment was in operation for a year, revised figures indicate that it actually cost $470,000, will have a 9-year useful life, and will produce net cash inflows of $77,000. The present value of an annuity of 1 for 6 years at 10% is 4.355 and for 9 years is 5.759. Instructions Determine whether the project should have been accepted based on (a) the original estimates and then on (b) the actual amounts. S AutoSave Of BS File Home Insert Draw Page Layout Formulas Data Review View Help F31 . X CDEF 1 44. Platoon Company is performing a post-audit of a project that was estimated 2 to cost $420,000, have a useful life of 6 years with a zero salvage value, and result 3 in net cash inflows of $100,000 per year. After the investment was in operation for 4 a year, revised figures indicate that it actually cost $470,000, will have a 9-year 5 useful life, and will produce net cash inflows of $77,000. The present value of an 6 annuity of 1 for 6 years at 10% is 4.355 and for 9 years is 5.759 7 Determine whether the project should have been accepted based on and then on 8 (a) the original estimates 9 Original Cash Flows $100,000 4.355 $435,500 10 Investment $420,000 1.000 $420,000 11 NPV $15,500 12 (b) the actual amounts. 13 Original Cash Flows $77,000 5.759 $443,443 14 Investment $470.000 1.000 $470,000 15 NPV ($26,557) 16 Rejected 18 Platoon should not have invested in the project based on the actual amounts, 19 since the net present value is negative. The decrease of $42,057 in net present 20 value was caused due to a decrease of $23,000 per year in net cash inflows and a 21 $50,000 increase in the cost of the capital investment. This more than offsets the 3- 22 year increase in useful life. 23