Question

Bonita Company is considering a long-term investment project called ZIP, ZIP will require an investment of $122,100. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,500, and annual cash outflows would increase by $39,800. The company's required rate of return is 12%. Click here to view PV table. Calculate the net present value on this project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Whether this project should be accepted? The project should be

Answer 1

Net Puesent Vatue $ 122,100 Initial envestment Annual cauh intiocos 8 80,500 Inciear in cashtloco! lest ! Incea in expense $ 39,800 $ 40/700 Ner cash intlows Pv annuity JaCHOI @1a% to 4 yeaus - 3.03135 Puesent Vatue of cash intlows $ 40,700 x 3.03785 $ 123,620 $1a, lo 0 $123.620 $1520 Since, NPV s posHive Puozect Shoceld be Accepled