Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Loud Music is considering investing $ 750, 000 in private lesson studios that will have no residual value. The studios are expected to result in

Loud Music is considering investing $ 750, 000 in private lesson studios that will have no residual value. The studios are expected to result in annual net cash inflows of $ 85, 000 per year for the next nine years. Assuming that Loud Music uses a 10 % hurdle rate, what is the net present value (NPV) of the studio investment? Is this a favorable investment?

The net present value of the studio investment is $ ______________. Since the NPV is __________ , the studio investment _________ Loud Music's minimum required rate of return. Therefore, the investment is _____________? .

image text in transcribedimage text in transcribed

Reference Present Value of Annuity of $1 Periods| 1% | 2% | 3% | 4% | 5% | 6% | 8% | 10% | 12% | 14% | 16% | 18% | 20% 2 10.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 21.970 1.942 1.9131.8861.859 1.833 1.783 1.736 1.690 1.647 1605 1.5661.528 3 2.941 2.884 2.829 2.7752.7232.673 2577 2487 2.402 2.322 2.246 2.1742.106 4 3.902 3.808 3.717 3.6303.546 | 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 54.853 4.713 4.580 4.4524.329 4.212 3.993 3.791 3.605 3.433 3.274 3.1272.991 6 5.795 5.601 5.4175.242 5.076 4.917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 76.728 6.4726.230 6.0025.786 5.582 5.206 4.868 4.564 4.288 4.039 3.812 3.605 8 7.652 7.325 7.020 6.7336.463 6.210 5.747 5.335 4.968 4.639 4.344 4.078 3.837 9 8.5668.167.7867.4357.108 6.802 6.247 5.759 5.328 4.946 4.6074.303 4.031 10 9.471 8.983 8.530 8.1117.7227.360 6.710 6.145 5.650 5.216 4.833 4.494 4.192 11 10.368 9.787 9.253 8.7608.3067.887 7.1396.4955.938 5.453 5.029 4.656 4.327 12 11.255 10.575 9.954 9.3858.863 8.3847.5366.814 6.194 5.660 5.197 4.793 4.439 13 12.134 11.348 10.635 9.9869.3948.853 7.9047.103 6.424 5.842 5.342 4.910 4.533 14 13.004 12.106 11.296 10.563 9.899 9.2958.2447.3676.628 6.002 5.468 5.008 4.611 15 13.865 12.849 11.938 11.118 10.380 9.712 8.5597.606 6.811 6.142 5.5755.092 4.675 20 18.046 16.351 14.877 13.590 12.462 11.470 9.8188.514 | 7.469 6.623 5.9295.353 4.870 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 6.873 6.0975.4674.948 30 25.808 22.396 19.600 17.292 15.372 13.765 11258 9.427 8.055 7.003 6.1775.5174.979 40 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.779 8.244 7.105 6.233 5.548 4.997 2 2

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

Auditing A Practical Manual For Auditors

Authors: Lawrence Robert Dicksee

1st Edition

1360462546, 978-1360462547

More Books

Students also viewed these Accounting questions

Question

Design a cross-cultural preparation program. page 313

Answered: 1 week ago

Question

Evaluate employees readiness for training. page 289

Answered: 1 week ago