Question : 157. Project A requires an original investment of $65,000. The project : 1239653

 

157. Project A requires an original investment of $65,000. The project will yield cash flows of $15,000 per year for seven years. Project B has a calculated net present value of $5,500 over a five year life. Project A could be sold at the end of five years for a price of $30,000. (a) Using the proper table below determine the net present value of Project A over a five-year life with salvage value assuming a minimum rate of return of 12%. (b) Which project provides the greatest net present value?Below is a table for the present value of $1 at compound interest. 

Year

6%

10%

12%

1

.943

.909

.893

2

.890

.826

.797

3

.840

.751

.712

4

.792

.683

.636

5

.747

.621

.567

 

 

 

 

Below is a table for the present value of an annuity of $1 at compound interest. 

Year

6%

10%

12%

1

.943

.909

.893

2

1.833

1.736

1.690

3

2.673

2.487

2.402

4

3.465

3.170

3.037

5

4.212

3.791

3.605

 

 

 

 

 

 

 

 

 

 

158. Project A requires an original investment of $50,000. The project will yield cash flows of $15,000 per year for seven years. Project B has a calculated net present value of $13,500 over a four year life. Project A could be sold at the end of four years for a price of $25,000. (a) Using the proper table below determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. (b) Which project provides the greatest net present value?Below is a table for the present value of $1 at compound interest. 

Year

6%

10%

12%

1

.943

.909

.893

2

.890

.826

.797

3

.840

.751

.712

4

.792

.683

.636

5

.747

.621

.567

 

 

 

 

Below is a table for the present value of an annuity of $1 at compound interest. 

Year

6%

10%

12%

1

.943

.909

.893

2

1.833

1.736

1.690

3

2.673

2.487

2.402

4

3.465

3.170

3.037

5

4.212

3.791

3.605

 

 

 

 

 

 

 

 

 

 

159. What is the present value of $8,000 to be received at the end of six years, if the required rate of return is 15%?Below is a table for the present value of $1 at compound interest. 

Year

15%

Year

15%

1

0.87

6

0.432

2

0.756

7

0.376

3

0.658

8

0.327

4

0.572

9

0.284

5

0.497

10

0.247

 

 

 

 

Below is a table for the present value of an annuity of $1 at compound interest. 

Year

15%

Year

15%

1

0.87

6

3.785

2

1.626

7

4.16

3

2.283

8

4.487

4

2.855

9

4.772

5

3.353

10

5.019

 

 

 

 

 

 

 

 

 

 

160. Norton Company is considering a project that will require an initial investment of $750,000 and will return $200,000 each year for five years.  Required:If taxes are ignored and the required rate of return is 9%, what is the project’s net present value?  Based on this analysis, should  Norton Company proceed with the project?Below is a table for the present value of $1 at compound interest.

Year

9%

Year

9%

1

0.917

6

0.596

2

0.842

7

0.547

3

0.772

8

0.502

4

0.708

9

0.460

5

0.650

10

0.422

 

 

 

 

Below is a table for the present value of an annuity of $1 at compound interest.

Year

9%

Year

9%

1

0.917

6

4.486

2

1.759

7

5.033

3

2.531

8

5.535

4

3.240

9

5.995

5

3.890

10

6.418

 

 

 

 

 

 

 

 

 

 

 

 

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