Equal Net Annual Cash Flows

Equal Net Annual Cash Flows - Equal Net Annual Cash Flows...

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Equal Net Annual Cash Flows Tappan Company's net annual cash flows are $26,000. If we assume this amount is uniform over the asset's useful life , we can compute the present value of the net annual cash flows by using the present value of an annuity of 1 for 10 periods (in Table 2, Appendix C ). The computations at rates of return of 12% and 15%, respectively, are: Illustration 23-23 Present value of net annual cash flows The analysis of the proposal by the net present value method is as follows: Illustration 23-24 Computations of net present value Helpful Hint
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The ABC Co. expects equal cash flows over an asset's 5-year useful life. What discount factor should it use in determining present values if management wants (1) a 12% return or (2) a 15% return? The proposed capital expenditure is acceptable at a required rate of return of both 12% and 15% because the net present values are positive. Unequal Net Annual Cash Flows
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Equal Net Annual Cash Flows - Equal Net Annual Cash Flows...

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