Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Exhibit 8-2 Liam Company has two independent investment opportunities, each requiring an initial investment of $130,000. The company's required rate of return is 12 percent.

Exhibit 8-2 Liam Company has two independent investment opportunities, each requiring an initial investment of $130,000. The company's required rate of return is 12 percent. The cash inflows for each investment are provided below. Investment A Investment B Year 1 $70,000 $ 10,000 Year 2 50,000 30,000 Year 3 30,000 50,000 Year 4 10,000 70,000 Total inflows $160,000 $160,000 Factors: Present Value of $1 Factors: Present Value of an Annuity (r-12%) (r-12%) Year 01 1.0000 Year 1 0.8929 Year 1 0.8929 Year 2 0.7972 Year 21 1.6901 Factors: Present Value of $1 Factors: Present Value of an Annuity Year 0 (r=12%) 1.0000 (r=12%) Year 1 0.8929 Year 1 0.8929 Year 2 0.7972 Year 2 1.6901 Year 3 0.7118 Year 3 2.4018 Year 4 0.6355 Year 4 3.0373 Refer to Exhibit 8-2. What is the net present value of Investment A (rounded to the nearest dollar)? O $72 O $15,600 O $30,000 O $361,680 None of the answer choices is correct

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

Question Can a Keogh plan fund be reached by the owners creditors?

Answered: 1 week ago

Question

Question What happens to my plan if I die?

Answered: 1 week ago