Bonita Inc. is considering a capital investment proposal that costs $227,500 and has an estimated life of four years and no residual value. The estimated net cash flows are as follows:               Year                     Net Cash Flow $97,500 80,000 60,000 40,000 The minimum desired rate of return for net present value analysis is 10%. The present value of $1 at compound interest rates of 10% for 1,2,3, and 4 years is .909, .826, .751, and .683, respectively. Determine the net present value.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Bonita Inc. is considering a capital investment proposal that costs $227,500 and has an estimated life of four years and no residual value. The estimated net cash flows are as follows:

              Year                     Net Cash Flow

  • $97,500
  • 80,000
  • 60,000
  • 40,000

The minimum desired rate of return for net present value analysis is 10%. The present value of $1 at compound interest rates of 10% for 1,2,3, and 4 years is .909, .826, .751, and .683, respectively. Determine the net present value.

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