Problem 22-07

Appendix B:

Dropdowns:

The investment [should, should not] be made.

Problem 22-07 An investment with total costs of $11,000 will generate total revenues of $12,000 for one year. Use Appendix B to answer the questions. Use a minus sign to enter negative values, if any. Round your answers to the nearest dollar. If funds cost 14 percent, the NPV is $ What would be your advice to management? The investment -Select- be made. Would your answers be different if the cost of capital is 8 percent? If funds cost 8 percent, the NPV is $ The investment -Select- be made. Time Period (e.g., year) 12345 1% 2% 3% 4% 5% 6% 7% 8% .990 980 971 962 952 943 935 .926 2 980 961 943 925 907 .890 .873 971 942 915 889 864 840 961 924 889 855 823 792 951 906 863 822 784 747 3 67899 10 12345 Interest Factors for the Present Value of One Dollar 9% 10% 12% 14% 15% 16% 24% 18% 20% .847 .833 718 .694 .650 .806 917 909 .893 .877 870 .862 .857 .842 .826 797 .769 .756 .743 816 .794 .772 .751 712 675 658 .641 .609 .579 524 .735 708 683 636 592 572 552 516 482 681 .650 621 567 519 497 476 437 402 11 .896 .804 722 650 585 527 475 .429 .388 350 287 .887 788 .701 .625 557 .497 444 .397 356 .319 257 .879 773 .681 601 530 469 .415 .368 326 .290 .229 .870 758 .661 .577 505 .442 .388 .340 .299 .263 205 .861 743 .642 .555 .481 417 .362 .315 .275 239 183 16 .853 17 18 19 20 25 .763 713 630 942 888 838 790 746 705 .666 596 564 507 .933 871 813 760 711 .665 .623 583 547 513 .452 923 853 789 731 677 627 582 540 502 467 404 914 837 766 703 645 592 544 500 .460 424 .361 905 820 744 676 614 558 508 463 .422 .386 .322 .844 .836 728 623 534 458 394 339 .292 .252 218 163 714 605 513 436 371 .317 .270 231 198 146 700 587 .494 .416 .350 296 250 212 .180 130 .828 .686 570 .475 .396 .331 276 .194 .164 .116 .820 .673 554 .149 .104 .456 377 .312 258 .178 .780 .610 .478 .375 .295 233 .038 30 .742 .552 .412 308 .231 .174 .131 .099 075 057 033 020 015 .184 232 .215 .146 .116 .092 .059 456 432 410 370 335 .400 .376 354 314 279 351 327 305 266 233 .308 284 263 226 .194 144 270 247 227 191 162 .116 179 .423 .373 .341 .291 237 215 195 162 135 094 208 187 168 137 112 076 182 163 145 116 .093 061 .160 .141 125 099 078 .049 .140 .123 108 084 065 .040 275 222 .030 28% .781 .610 477 024 .016 .010 .005 .227 178 139 .108 .085 .066 .052 .040 123 107 093 071 054 032 019 108 093 080 060 .045 026 015 095 .081 069 .051 038 021 .012 083 .070 060 043 031 017 .009 073 061 051 037 026 014 .007 .002 012 007 004 .002 .001 .032 .025