Beene Distributing is considering a project that will return $270,000 annually at the end of each year for the next six years. If Beene demands an annual return of 10% and pays for the project immediately, how much is it willing to pay for the project? (PV of $1. FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "PV of an Ordinary Annuity" to 4 decimal places and final answer to the nearest whole dollar.) Periodic Cash Flow p (PV of an Ordinary Annuity) Present Value

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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**Project Evaluation and Present Value Calculation**

Beene Distributing is evaluating a project that promises an annual return of $270,000 at the end of each year for six years. With a required annual return of 10%, Beene seeks to determine the maximum amount it should invest in this project right now. To find this, the calculation involves Present Value (PV) of an Ordinary Annuity using appropriate factors.

### Calculation Method:

1. **Periodic Cash Flow**
   - Amount: $270,000
   
2. **Present Value Factor (PVF) of an Ordinary Annuity**
   - Use provided tables to find the factor corresponding to 10% over six years.

3. **Present Value Calculation**
   - Formula: Periodic Cash Flow × PVF = Present Value
   - Round the PV factor to four decimal places and the final present value to the nearest whole dollar.

These calculations help determine the present value of future cash flows, guiding investment decisions.
Transcribed Image Text:**Project Evaluation and Present Value Calculation** Beene Distributing is evaluating a project that promises an annual return of $270,000 at the end of each year for six years. With a required annual return of 10%, Beene seeks to determine the maximum amount it should invest in this project right now. To find this, the calculation involves Present Value (PV) of an Ordinary Annuity using appropriate factors. ### Calculation Method: 1. **Periodic Cash Flow** - Amount: $270,000 2. **Present Value Factor (PVF) of an Ordinary Annuity** - Use provided tables to find the factor corresponding to 10% over six years. 3. **Present Value Calculation** - Formula: Periodic Cash Flow × PVF = Present Value - Round the PV factor to four decimal places and the final present value to the nearest whole dollar. These calculations help determine the present value of future cash flows, guiding investment decisions.
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