Question

Net cash flows $ 63,000 $ 46,000 $ 83,000 $ 159,000 $ 41,000 $ 392,000 a. Compute the net present value of this investment. b. Should Beyer accept the investment?

Answer 1

a. $36,310.55

b. Yes

Explanation:

a. The computation of the net present value is shown below:-

Year Net Cash Flow PV at 12% PV of Net Cash Flows

1 $63,000 0.893 $56,259

2 $46,000 0.797 $36,662

3 $83,000 0.712 $59,096

4 $159,000 0.636 $101,124

5 $41,000 0.567 $23,247

Total $276,310.55 (B)

Invested Amount $240,000 (A)

Net Present Value $36,310.55 (B - A)

b. Since the net present value comes in positive so Beyer should accept this investment