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Mary was extremely cautious as she prepared her estimates of the cash inflows related to a new product line. The initial investment in depreciable
Mary was extremely cautious as she prepared her estimates of the cash inflows related to a new product line. The initial investment in depreciable assets is $52,000 today with no salvage value. This investment is expected to generate the following net cash inflows for each of the next 5 years, where the assets all have 5-year useful lives: $15,000, $20,000, $30,000, $21,000, and $14,000, respectively. The company's required rate of return is 12%; its tax rate is 25%. Determine the NPV that Mary initially expected for this investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) By the end of year 3, the following cash flows had been received: $10,000 (year 1), $15,000 (year 2), and $34,000 (year 3). If the final 2 years' cash flows come in as expected, will the investment's NPV surpass expectations? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).)
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