Question

Coyne Corporation is evaluating a capital investment opportunity. This project would require an initial investment of $30,000 to purchase equipment. The equipment will have a residual value at the end of its life of $2,000. The useful life of the equipment is 4 years. The new project is expected to generate additional net cash inflows of S24 000 per year for each of the four years. o nes required rate of return is 14% The net present value of this project is closest to: EEB (Click the icon to view the present value of $1 table.) EEB (Click the icon to view the present value of annuity of $1 table.) A. $41,120. B. $39,936 C. $53,360. D. $20,450

Answer 1

A. $41,120.

Step-by-step explanation:

Year Description Cash flow Present value@14%

0 Equipment cost ($30,000) ($30,000)

1-4 Additional CF $24,000 $69,929.10

4 Residual value $2,000 $1,184.16

Present value total $41,113.26

Based on the above calculation, the answer shall be A. $41,120.