BRIEF EXERCISE 12

BRIEF EXERCISE 12 - BRIEF EXERCISE 12-1 $450,000 $55,000 =...

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BRIEF EXERCISE 12-1 $450,000 ÷ $55,000 = 8.2 years BRIEF EXERCISE 12-2 Present Value Net annual cash flows – $40,000 X 5.65 Capital investment Net present value $226,000 220,000 $ 6,000 The investment should be made because the net present value is positive. BRIEF EXERCISE 12-3 Cash Flows X 10% Discount Factor = Present Value Present value of net annual cash flows Present value of salvage value Capital investment Net present value $25,000 70,000 X X 3.79079 .62092 = = $ 94,770 43,464 138,234 136,000 $ 2,234 Since the net present value is positive, the project is acceptable. BRIEF EXERCISE 12-4 Cash Flows X 9% Discount Factor = Present Value Present value of net annual cash flows Present value of salvage value Capital investment Net present value $35,000 0 X X 5.53482 .50187 = = ( $193,719 ) ( 0 ) ( 193,719 ) ( 200,000 ) ( $ (6,281 ) The reduction in downtime would have to have a present value of at least $6,281 in order for the project to be acceptable.
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BRIEF EXERCISE 12-5 Project A Cash Flows X 9% Discount Factor = Present Value Present value of net annual cash flows
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This note was uploaded on 05/16/2011 for the course AC 303 taught by Professor Richardkido during the Spring '11 term at Chaminade University.

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BRIEF EXERCISE 12 - BRIEF EXERCISE 12-1 $450,000 $55,000 =...

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