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Exercise 16-5A (Algo) Determining net present value LO 16-2 Campbell Company is considering investing in two new vans that are expected to generate combined
Exercise 16-5A (Algo) Determining net present value LO 16-2 Campbell Company is considering investing in two new vans that are expected to generate combined cash inflows of $29,500 per year. The vans' combined purchase price is $100,000. The expected life and salvage value of each are eight years and $20,900, respectively. Campbell has an average cost of capital of 10 percent. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a. Calculate the net present value of the investment opportunity. Note: 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? b. Should the investment opportunity be accepted?
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