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A company is considering a project with annual after-tax cash flows of $2,500.00 per year for six years. The company's cost of capital is 14 percent. Present and future value factors for a 14 percent interest rate for six years are as follows:   Future value of $1 2.195 Present value of $1 0.456 Future value of a series of equal payments 8.536 Present value of a series of equal payments 3.889   Using the net present value method, what is the maximum amount that the company should invest?   A) $1,140.00   B) $5,487.50   C) $9,722.50   D) $21,340.00

A company is considering a project with annual after-tax cash flows of $2,500.00 per year for six years. The company's cost of capital is 14 percent. Present and future value factors for a 14 percent interest rate for six years are as follows:   Future value of $1 2.195 Present value of $1 0.456 Future value of a series of equal payments 8.536 Present value of a series of equal payments 3.889   Using the net present value method, what is the maximum amount that the company should invest?   A) $1,140.00   B) $5,487.50   C) $9,722.50   D) $21,340.00

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company is considering a project with annual after-tax cash flows of $2,500.00 per year for six years. The company's cost of capital is 14 percent. Present and future value factors for a 14 percent interest rate for six years are as follows:

 

Future value of $1

2.195

Present value of $1

0.456

Future value of a series of equal payments

8.536

Present value of a series of equal payments

3.889

 

Using the net present value method, what is the maximum amount that the company should invest?

 

A)

$1,140.00

 

B)

$5,487.50

 

C)

$9,722.50

 

D)

$21,340.00

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