Question

Welcome to delaGATE WAS Assessment P XC Thunder Corporation, + ヨ Wells Fargo Inbox (8) - sdamon2@r 24X- DUE 5/3/19 ○ ley.com was assessment payer/products 82d89eO 5062-4e7a b978-a769848b6ed1/assessments bf264a85 09m ← → 仚 凸 ☆ 左 https:/ assessment education. Send to Gradebook Next > くPrev Question 3 Current Attempt in Progress Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $204,969 and have an estimated useful life of 12 years. It will be sold for $69,200 at that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $26,300. The company's borrowing rate is 8%, its cost of capital is 10%. Click here to view PV table. Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to O decimal places, eg. 125.) Net present value The project Attempts: 0 of 2 used Save for Later Check Answer 11:34 AM 급t O Type here to search 4/29/2019 2

Answer 1

Solution:

Computation of NPV
Particulars	Period	Amount	PV Factor (10%)	Present Value
Cash outflows:
Cost of equipment	0	$204,969	1	$204,969
Present value of cash outflows (A)				$204,969
Cash Inflows:
Annual cash inflows	1-12	$26,300	6.814	$179,200
Salvage value	12	$69,200	0.319	$22,049
Present value of cash inflow (B)				$201,249
NPV (B-A)				-$3,720

As NPV is negative, The project is not acceptable.