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Solomon Company is considering investing in two new vans that are expected to generate combined cash inflows of $27,000 per year. The vans' combined
Solomon Company is considering investing in two new vans that are expected to generate combined cash inflows of $27,000 per year. The vans' combined purchase price is $93,500. The expected life and salvage value of each are four years and $21,100, respectively. Solomon has an average cost of capital of 12 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.) b. Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted. a. Net present value $ 1,917.85 b. Will the return be above or below the cost of capital? Should the investment opportunity be accepted? Above Accepted
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