Austin Corporation is considering an investment opportunity with the following expected net cash inflows: Year 1, $260,000; Year 2, $360,000; Year 3, $375,000. At the end of Year 3, the residuall value of the investment would be $50,000. The company uses a discount rate of 10%, and the initial investment is $175,000. Calculate the NPV of the investment. (Round intermediary calculatio to the nearest dollar.) Present value of an ordinary annuity $1: 10% 0.909 1.736 2.487 3.170 3.791 1 2 3 4 5 Present value of $1: 10% 12% 0.893 1.690 2.402 3.037 3.605 12% The NPV of the investment is 14% 0.877 1.647 2.322 2.914 3.433 14% 16% 0.862 1.605 2.246 2.798 3.274 16%
Austin Corporation is considering an investment opportunity with the following expected net cash inflows: Year 1, $260,000; Year 2, $360,000; Year 3, $375,000. At the end of Year 3, the residuall value of the investment would be $50,000. The company uses a discount rate of 10%, and the initial investment is $175,000. Calculate the NPV of the investment. (Round intermediary calculatio to the nearest dollar.) Present value of an ordinary annuity $1: 10% 0.909 1.736 2.487 3.170 3.791 1 2 3 4 5 Present value of $1: 10% 12% 0.893 1.690 2.402 3.037 3.605 12% The NPV of the investment is 14% 0.877 1.647 2.322 2.914 3.433 14% 16% 0.862 1.605 2.246 2.798 3.274 16%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Austin Corporation is considering an investment opportunity with the following expected net cash inflows: Year 1, $260,000; Year 2, $360,000; Year 3, $375,000. At the end of Year 3, the residual
value of the investment would be $50,000. The company uses a discount rate of 10%, and the initial investment is $175,000. Calculate the NPV of the investment. (Round intermediary calculations
to the nearest dollar.)
Present value of an ordinary annuity $1:
10%
12%
0.909
0.893
1.736
1.690
2.487
2.402
3.170
3.037
3.791
3.605
1
2
3
4
5
Present value of $1:
10%
12%
The NPV of the investment is
14%
0.877
1.647
2.322
2.914
3.433
14%
16%
0.862
1.605
2.246
2.798
3.274
16%
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