Homework SourseShields Company has gathered the following data on a propose
Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.) Investment required in equipment $520,000 Annual cash inflows $78,000 Salvage value $0 Life of the investment 10 years Discount rate 6% The net present value on this investment is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.) a.) $78,000 b.) $520,000 c.) $74,750 d.)$54,080
Solution
Answer:
| (In $) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 |
| Cash inflow | 78,000 | 78,000 | 78,000 | 78,000 | 78,000 | 78,000 | 78,000 | 78,000 | 78,000 | 78,000 |
| P.V. factor @ 6.00% | 0.943 | 0.890 | 0.840 | 0.792 | 0.747 | 0.705 | 0.665 | 0.627 | 0.592 | 0.558 |
| Present Value of inflows | 73,585 | 69,420 | 65,489 | 61,782 | 58,286 | 54,986 | 51,873 | 48,937 | 46,167 | 43,554 |
| (a) Total Present Value of inflows | 574,080 | |||||||||
| (b) Total Present Value of outflows | 520,000 | |||||||||
| (c )Net Present Value ( a -b) | 54,080 |
