Exercise 10-5A Determining net present value LO 10-2 Perez Company is considering investing in two new vans that are expected to generate combined cash inflows of $25,000 per year. The vans' combined purchase price is $97,500. The expected life and salvage value of each are eight years and $21,500, respectively. Perez has an average cost of capital of 14 percent. (PV of $1 and PVA of $1 (Use appropriate factor(s) from the tables provided.) Required a. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.) b. Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted a Net present value b. Will the retum be above or below the cost of capital? Should the investment opportunity be accepted? Exercise 10-6A Determining net present value LO 10-2 Aaron Heath is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Aaron expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows: Year of Operation Cash Intlow Cash Outflow 2019 $13,300 $ 9,500 2020 19,800 11000 2021 21500 12,000 2022 21,500 12800 In addition to these cash flows, Aaron expects to pay $20,100 for the equipment. He also expects to pay $2,800 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $1,100 salvage value and a four year useful life. Aaron desires to earn a rate of return of 8 percent. (PV of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the net present value of the investment opportunity (Negative amount should be indicated by a minus sign. Round Intermediate calculations and final answer to 2 decimal places.) b. Indicate whether the investment opportunity is expected to earn a return that is above or below the desired rate of return and whether it should be accepted 3. Net present value bWill the return be above of below the cost of capital? Should the investment opportunity be accepted