Question

Marigold Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment $305000 $504000 Annual net income 30000 46000 Net annual cash inflow 110000 156000 Estimated useful life 5 years 6 years Salvage value 0 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.89 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111

The net present value for Project Nuts is:_______.
a. $84000.
b. $679380.
c. $336316.
d. $175380.

Answer 1

d. $175,380.

Step-by-step explanation:

Net present value for Project Nuts = (Net annual cash inflow*PV of annuity at 10%, 6 period) - Initial investment

Net present value for Project Nuts = ($156000*4.355) - $504,000

Net present value for Project Nuts = $679,380 - $504,000

Net present value for Project Nuts = $175,380