Required information Use the following information for the Quick Study below. The following information applies to the questions displayed below, Peng Company is considering an investment expected to generate an average net income after taxes of $2,500 for three years. The investment costs $53,700 and has an estimated $10,500 salvage value. QS 24-8 Net present value LO P3 Assume Peng requires a 10 % return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.) PV Present Cash Flow Select Chart Amount Value Factor Annual cash flow Residual value Net present value TABLE B.1 p 1/(1i Present Value of 1 Rate 5% 8% 9% Perlods 1% 2% 3% 4% 6% 7% 10% 12% 15% 0.9434 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9346 0.9259 0.9174 0.9091 0.8929 0.8696 2. 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.7972 0.7561 0.9151 3 0.9706 0.9423 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7118 0.6575 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6355 0.5718 0.9515 0.8219 0.6209 0.9057 0.8626 0.7835 0.7473 0.7130 0.6806 0.6499 0.5674 0.4972 0.7903 6 0.9420 0.8880 0.8375 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5066 0.4323 0.8706 0.8131 0.6651 7 0.9327 0.7599 0.7107 0.6227 0.5835 0.5470 0.5132 0.4523 0.3759 8 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4039 0.3269 0.9143 0.6446 0.4604 0.2843 0.8368 0.7664 0.7026 0.5919 0.5439 0.5002 0.4241 0.3606 0.8203 10 0.9053 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3220 0.2472 0.2149 11 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.2875 0.8874 0.8787 0.1869 12 0.7885 0.7014 0.6246 0.5568 0,4970 0.4440 0.3971 0.3555 0.3186 0.2567 0.2292 13 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.1625 0.3878 0.1413 14 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3405 0.2992 0.2633 0.2046 0.4173 15 0.8613 0.7430 0.6419 0.5553 0.4810 0.3624 0.3152 0.2745 0.2394 0.1827 0.1229 16 0.8528 0.7284 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.2176 0.1631 0.1069 0.4363 0.3714 0.2311 0.1456 17 0.8444 0.7142 0.6050 0.5134 0.3166 0.2703 0.1978 0.0929 0.2120 18 0.8360 0.7002 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.1799 0.1300 0.0808 0.3305 19 0.8277 0.6864 0.5703 0.4746 0.3957 0.2765 0.2317 0.1945 0.1635 0.1161 0.0703 0.1486 20 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.2584 0.2145 0.1784 0.1037 0.0611 0.1160 0.0923 25 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.1460 0,0588 0.0304 0.0994 30 0.7419 0.5521 0.4120 0.3083 0.2314 0.1741 0.1314 0.0754 0.0573 0.0334 0.0151 35 0.7059 0.5000 0.3554 0.2534 0.1813 0.1301 0.0937 0.0676 0.0490 0.0356 0.0189 0.0075 0.1420 0.0460 0.0318 40 0.6717 0.4529 0.3066 0.2083 0.0972 0.0668 0.0221 0.0107 0.0037 Used to compute the present value of a known future amount. For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5,000 in 6 years from today? Using the factors of n- 12 and i 5% (12 semiannual periods and a semiannual rate of 5%), the factor is 0.5568. You would need to invest $2,784 today ($5,000 x 0.5568). TABLE B.2 f= (1" Future Value of 1 Rate Perlods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 15% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1,0400 1.0100 1.0200 1.0300 1.0500 1.0600 1.0700 1.0800 1.0900 1.1000 1.1200 1.1500 1.1025 2 1.0201 1.0404 1.0609 1.0816 1.1236 1.1449 1.1664 1.1881 1,2100 1.2544 1.3225 1.0612 1.3310 1.0303 1.0927 1.1249 1.1576 1.1910 1.2250 1.2597 1.2950 1.4049 1.5209 1.2155 1.2625 1.3108 1.5735 4 1.0406 1.0824 1.1255 1.1699 1.3605 1.4116 1.4641 1.7490 1.1041 1.5386 5 1.0510 1.1593 1.2167 1.2763 1.3382 1.4026 1.4693 1.6105 1.7623 2.0114 6 1.0615 1.1262 1.1941 1.2653 1.3401 1.4185 1.5007 1.5869 1.6771 1.7716 1.9738 2.3131 1.3159 1.4071 1.8280 7 1.0721 1.1487 1.2299 1.5036 1.6058 1.7182 1.7138 1.9487 2.2107 2.6600 1.3686 1.8509 8 1.0829 1.1717 1.2668 1.4775 1.5938 1.9926 2.1436 2.4760 3.0590 1.0937 1.1951 1.3048 1.4233 1.5513 1.6895 1.8385 1.9990 2.1719 2.3579 2.7731 3.5179 1.2190 1.3439 1,6289 3.1058 10 1.1046 1.4802 1.7908 1.9672 2.1589 2.3674 2,5937 4.0456 11 1.1157 1.2434 1.3842 1.5395 1.7103 1.8983 2.1049 2.3316 2.5804 2.8531 3.4785 4.6524 1.1268 1.6010 1.7959 12 1.2682 1.4258 2.0122 2.2522 2.5182 2.8127 3.1384 3.8960 5.3503 2.1329 13 1.1381 1.2936 1.4685 1.6651 1.8856 2.4098 2.7196 3.0658 3.4523 4.3635 6.1528 14 1.1495 1.3195 1.5126 1.7317 1.9799 2.2609 2.5785 2.9372 3.3417 3.7975 4.8871 7.0757 1.8009 4.1772 15 1.1610 1.3459 1.5580 2.0789 2.3966 2.7590 3.1722 3.6425 5.4736 8.1371 1.1726 1.3728 2.1829 9.3576 16 1.6047 1.8730 2.5404 2.9522 3.4259 3.9703 4.5950 6.1304 1.6528 2.2920 2.6928 17 1.1843 1.4002 1.9479 3.1588 3.7000 4.3276 5.0545 6.8660 10.7613 4.7171 18 1.1961 1.4282 1.7024 2.0258 2.4066 2.8543 3.3799 3.9960 5.5599 7.6900 12.3755 1.2081 3.6165 19 1.4568 1.7535 2.1068 2.5270 3.0256 4.3157 5.1417 6.1159 8.6128 14.2318 20 1.2202 1.4859 1.8061 2.1911 2.6533 3.2071 3.8697 4.6610 5.6044 6.7275 9.6463 16.3665 25 1.2824 1.6406 2.0938 2.6658 3.3864 4.2919 5.4274 6.8485 8.6231 10.8347 17.0001 32.9190 13.2677 30 1.3478 1.8114 2.4273 3.2434 4.3219 5.7435 7.6123 10.0627 17.4494 29.9599 66.2118 2.8139 5.5160 35 1.4166 1,9999 3.9461 7,6861 10.6766 14.7853 20.4140 28.1024 52.7996 133.1755 14.9745 31.4094 93.0510 267.8635 40 1.4889 2.2080 3.2620 4.8010 7.0400 10.2857 21.7245 45.2593 Used to compute the future value of a known present amount. For example: What is the accumulated value of $3,000 invested today at 8% compounded quarterly for 5 years? Using the factors of n 20 and i= 2 % ( 20 quarterly periods and a quarterly interest rate of 2%), the factor is 1.4859. The accumulated value is $4,457.70 ($3,000 x 1.4859). TABLE B.3 /i (1i)" Present Value of an Annuity of 1 Rate Perlods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 15% 0.9615 0.9901 0.9804 0.9709 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.8929 0.8696 1.9135 2 1.9704 1.9416 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 1.7355 1.6901 1.6257 2,7232 2.5771 2,4018 2.9410 2.8839 2.8286 2.7751 2.6730 2.6243 2.5313 2.4869 2.2832 3.9020 3.5460 3.8077 3.7171 3.6299 3.4651 3.3872 3.3121 3.2397 3.1699 3.0373 2.8550 4.1002 3.6048 5 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 3.9927 3.8897 3.7908 3.3522 3.7845 6 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.1114 5.3893 4.5638 7 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 5.2064 5.0330 4.8684 4.1604 6.2098 8 7.6517 7.3255 7.0197 6.7327 6.4632 5.9713 5.7466 5.5348 5.3349 4.9676 4.4873 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590 5.3282 4.7716 8.9826 7,0236 6.1446 10 9.4713 8.5302 8.1109 7.7217 7.3601 6.7101 6.4177 5.6502 5.0188 8.3064 8.8633 10.3676 7,8869 11 9.7868 9.2526 8.7605 7.4987 7.1390 6.8052 6.4951 5.9377 5.2337 9.3851 7.5361 12 11.2551 10.5753 9.9540 8.3838 7.9427 7.1607 6.8137 6.1944 5.4206 13 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869 7.1034 6.4235 5.5831 10.563 8.7455 14 13.0037 12.1062 11.2961 9.8986 9.2950 8.2442 7.7862 7.3667 6.6282 5.7245 11.1184 9.1079 15 13.8651 12.8493 11.9379 10.3797 9.7122 8.5595 8.0607 7.6061 6.8109 5.8474 7.8237 16 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 6.9740 5.9542 9.1216 6.0472 17 15.5623 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 8.5436 8.0216 7.1196 14.9920 10.8276 9.3719 7.2497 18 16.3983 13.7535 12.6593 11.6896 10.0591 8.7556 8.2014 6.1280 10.3356 7.3658 6.1982 19 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 9.6036 8.9501 8.3649 20 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.4694 6.2593 10.6748 25 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 9.8226 9.0770 7.8431 6.4641 30 25.8077 22.3965 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578 10.2737 9.4269 8.0552 6.5660 14.4982 35 29.4086 24.9986 21.4872 18.6646 16.3742 12.9477 11.6546 10.5668 9.6442 8.1755 6.6166 23.1148 17.1591 15.0463 11.9246 8.2438 40 32.8347 27.3555 19.7928 13.3317 10.7574 9.7791 6.6418 Used to calculate the present value of a series of equal payments made at the end of each period. For example: What is the present value of $2,000 per year for 10 years assuming an annual interest rate of 9%. For (n= 10, i= 9 % ) , the PV factor is 6.4177. $2,000 per year for 10 years is the equivalent of $12,835 today ($2,000 x 6.4177) TABLE B.4 f [(1" 1Vi Future Value of an Annuity of 1 Rate 3% 12% Perlods 1% 2% 4% 5% 6% 7% 8% 9% 10% 15% 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 2.0800 2.0100 2.0200 2.0300 2.0400 2.0500 2.0600 2.0700 2.0900 2.1000 2.1200 2.1500 3.3744 3.0301 3.0604 3.0909 3.1216 3.1525 3.1836 3.2149 3.2464 3.2781 3.3100 3.4725 4 4.0604 4.1216 4.1836 4.2465 4.3101 4.3746 4.4399 4.5061 4.5731 4.6410 4.7793 4.9934 5.2040 5.3091 5.5256 5.9847 6.1051 6.3528 5 5.1010 5.4163 5.6371 5.7507 5.8666 6.7424 7.5233 6 6.1520 6.3081 6.4684 6.6330 6.8019 6.9753 7.1533 7.3359 7.7156 8.1152 8.7537 7.2135 8.3938 8.6540 7 7.4343 7.6625 7.8983 8.1420 8.9228 9.2004 9.4872 10.0890 11.0668 12.2997 8 8.2857 8.5830 8.8923 9.2142 9.5491 9.8975 10.2598 10.6366 11.0285 11.4359 13.7268 9.3685 13.0210 13.5795 9.7546 10.1591 10.5828 11.0266 11.4913 11.9780 12.4876 14.7757 16.7858 10 10.4622 10.9497 11.4639 12.0061 12.5779 13.1808 13.8164 14.4866 15.1929 15.9374 17.5487 20.3037 11 11.5668 12.1687 12.8078 13.4864 14.2068 14.9716 15.7836 16.6455 17.5603 18.5312 20.6546 24.3493 14.1920 16.8699 17.8885 20.1407 24.1331 12 12.6825 13.4121 15.0258 15.9171 18.9771 21.3843 29.0017 13.8093 14.9474 15.6178 18.8821 21.0151 28.0291 13 14.6803 16.6268 17.7130 20.1406 21.4953 22.9534 24.5227 34.3519 40.5047 14 15.9739 17.0863 18.2919 19.5986 22.5505 24.2149 26.0192 27.9750 32.3926 16.0969 15 17.2934 18.5989 20.0236 21.5786 23.2760 25.1290 27.1521 29.3609 31.7725 37.2797 47.5804 16 17.2579 18.6393 20.1569 21.8245 23.6575 25.6725 27.8881 30.3243 33.0034 35.9497 42.7533 55.7175 20.0121 21.7616 23.6975 17 18.4304 25.8404 28.2129 30.8402 33.7502 36.9737 40.5447 48.8837 65.0751 21.4123 37.4502 41.3013 18 19.6147 23.4144 25.6454 28.1324 30.9057 33.9990 45.5992 55.7497 75.8364 22.8406 30.5390 46.0185 19 20.8109 25.1169 27.6712 33.7600 37.3790 41.4463 51.1591 63.4397 88.2118 29.7781 15.7620 10 20 22.0190 .8704 3.0660 7856 40.9955 1.16 57.2750 72,0524 25 28.2432 32.0303 36.4593 41.6459 47.7271 54.8645 63.2490 73.1059 84.7009 98.3471 133.3339 212.7930 30 34.7849 40.5681 47.5754 56.0849 66.4388 79.0582 94.4608 113.2832 136.3075 164.4940 241.3327 434.7451 215.7108 35 41.6603 49.9945 60.4621 73.6522 90.3203 111.4348 138.2369 172.3168 271.0244 431.6635 881.1702 337.8824 40 48.8864 60.4020 75.4013 95.0255 120.7998 154.7620 199.6351 259.0565 442.5926 767.0914 1,779.0903 Used to calculate the future value of a series of equal payments made at the end of each period. For example: What is the future value of $4,000 per year for 6 years assuming an annual interest rate of 8%. For (n6, i= 8% ) , the FV factor is 7.3359. $4,000 per year for 6 years accumulates to $29,343.60 ($4,000 x 7.3359)