Question 35 of 46 - 72 III View Policies Current Attempt in Progress Stanton Company is performing a post-audit of a project completed one year ago. The initial estimates were that the project would cost $490,000, would have a useful life of 9 years, zero salvage value, and would result in net annual cash flows of $90,000 per year. Now that the investment has been in operation for 1 year, revised figures indicate that it actually cost $510,000, will have a useful life of 11 years, and will produce net annual cash flows of $77,000 per year. Assume a discount rate of 10%. TABLE 3 Present Value of 1 (n) Periods 4% 5% 7% 8% 9% 10% 12% 1 2 3 4 5 11% .90090 .81162 .73119 .65873 .59345 .96154 .92456 .88900 .85480 .82193 .79031 .75992 .73069 .70259 .67556 .64958 .62460 .60057 .57748 .55526 6 7 8 9 10 .95238 .90703 .86384 .82270 .78353 .74622 .71068 .67684 .64461 .61391 .58468 .55684 .53032 .50507 .48102 6% .94340 .89000 .83962 .79209 .74726 .70496 .66506 .62741 .59190 .55839 .52679 .49697 .46884 .44230 .41727 .39365 .37136 .35034 .33051 .31180 0.93458 0.87344 0.81630 0.76290 0.71299 0.66634 0.62275 0.58201 0.54393 0.50835 .92593 .85734 .79383 .73503 .68058 .63017 .58349 .54027 .50025 .46319 .42888 .39711 .36770 .34046 .31524 .29189 .27027 .25025 .23171 .21455 .91743 .84168 .77218 .70843 .64993 .59627 .54703 .50187 46043 .42241 .38753 .35554 .32618 .29925 .27454 .25187 .23107 .21199 .19449 .17843 .90909 .82645 .75132 .68301 .62092 .56447 .51316 .46651 42410 .38554 .35049 .31863 .28966 .26333 .23939 .21763 .19785 .17986 .16351 .14864 .89286 .79719 .71178 .63552 .56743 .50663 .45235 .40388 .36061 .32197 .28748 .25668 .22917 .20462 .18270 .16312 .14564 .13004 .11611 .10367 15% .86957 .75614 .65752 .57175 .49718 .43233 .37594 .32690 .28426 .24719 .21494 .18691 .16253 .14133 .12289 .10687 .09293 .08081 .07027 .06110 .53464 .48166 .43393 .39092 .35218 .31728 .28584 .25751 .23199 .20900 .18829 .16963 .15282 .13768 .12403 11 12 13 14 15 0.47509 0.44401 0.41496 0.38782 0.36245 0.33873 0.31657 0.29586 0.27615 0.25842 16 17 18 19 20 .53391 .51337 .49363 .47464 .45639 45811 .43630 .41552 .39573 .37689 TABLE4 Present Value of an Annuity of 1 4% (n) Payments 1 2 3 4 5 5% .95238 1.85941 2.72325 3.54595 4.32948 5.07569 5.78637 6.46321 7.10782 7.72173 6 7 8 9 10 .96154 1.88609 2.77509 3.62990 4.45182 5.24214 6.00205 6.73274 7.43533 8.11090 8.76048 9.38507 9.98565 10.56312 11.11839 11.65230 12.16567 12.65930 13.13394 13.59033 6% .94340 1.83339 2.67301 3.46511 4.21236 4.91732 5.58238 6.20979 6.80169 7.36009 7.88687 8.38384 8.85268 9.29498 9.71225 10.10590 10.47726 10.82760 11.15812 11.46992 7% 0.93458 1.80802 2.62432 3.38721 4.10020 4.76654 5.38929 5.97130 6.51523 7.02358 7.49867 7.94269 8.35765 8.74547 9.10791 9.44665 9.76322 10.05909 10.33560 10.59401 8% 9% 10% 11% 12% 15% .92593 .91743 .90909 .90090 .89286 .86957 1.78326 1.75911 1.73554 1.71252 1.69005 1.62571 2.57710 2.53130 2.48685 2.44371 2.40183 2.28323 3.31213 3.23972 3.16986 3.10245 3.03735 2.85498 3.99271 3.88965 3.79079 3.69590 3.60478 3.35216 4.62288 4.48592 4.35526 4.23054 4.11141 3.78448 5.20637 5.03295 4.86842 4.71220 4.56376 4.16042 5.74664 5.53482 5.33493 5.14612 4.96764 4.48732 6.24689 5.99525 5.75902 5.53705 5.32825 4.77158 6.71008 6.41766 6.14457 5.88923 5.650225.01877 7.13896 6.80519 6.49506 6.20652 5.93770 5.23371 7.53608 7.16073 6.81369 6.49236 6.19437 5.42062 7.90378 7.48690 7.10336 6.74987 6.42355 5.58315 8.24424 7.78615 7.36669 6.98187 6.62817 5.72448 8.55948 8.06069 7.60608 7.19087 6.81086 5.84737 8.85137 8.31256 7.82371 7.37916 6.97399 5.95424 9.12164 8.54363 8.02155 7.54879 7.11963 6.04716 9.37189 8.75563 8.20141 7.70162 7.24967 6.12797 9.60360 8.95012 8.36492 7.83929 7.36578 6.19823 9.81815 9.12855 8.51356 7.96333 7.46944 6.25933 11 12 13 14 15 8.30641 8.86325 9.39357 9.89864 10.37966 10.83777 11.27407 11.68959 12.08532 12.46221 16 17 18 19 20 Calculate the net present value. (Use the above table.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Original estimate Revised estimate Net present value $ $ Which project is successful
