Question
Question: UMB Associates has been offered a five-year contract to supply the computing requirements for a local bank. Cash Flow Information Cost of computer equipment$
Question:UMB Associates has been offered a five-year contract to supply the computing requirements for a local bank.
Cash Flow Information
Cost of computer equipment$ 350,000
Working capital required30,000
Upgrading of equipment in 2 years80,000
Salvage value of equipment in 5 years15,000
Annual net cash inflow130,000
The working capital would be released at the end of the contract.
Denny Associates requires a 12% return.
What is the net present value of the contract with the local bank?
Please help below.
____________________YEARSCASH FLOWS12% FACTORPRESENT VALUE
Investment in equipment
Working capital needed
Annual net cash inflows
Upgrading of equipment
Salvage value of equip.
Working capital released
Net present value
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Understanding Financial Accounting
Authors: Christopher D. Burnley
2nd Canadian Edition
1119406927, 978-1119406921
