Brett Collins is reviewing his company's investment in a cement plant. The company paid $14,200,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company's desired rate of return for present value computations is 12 percent. Expected and actual cash flows follow. (PV of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 4 Year 3 Expected $3,400,000 $5,110,000 $4,630,000 $5,150,000 Actual 2,640,000 2,970,000 4,840,000 3,900,000 Year 5 $4,270,000 3,600,000 Required a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. (Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar) Net present value (expected) Net present value (actual)
Brett Collins is reviewing his company's investment in a cement plant. The company paid $14,200,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company's desired rate of return for present value computations is 12 percent. Expected and actual cash flows follow. (PV of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 4 Year 3 Expected $3,400,000 $5,110,000 $4,630,000 $5,150,000 Actual 2,640,000 2,970,000 4,840,000 3,900,000 Year 5 $4,270,000 3,600,000 Required a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. (Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar) Net present value (expected) Net present value (actual)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: accounting
Transcribed Image Text:Brett Collins is reviewing his company's investment in a cement plant. The company paid $14,200,000 five years ago to acquire the
plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original
expectations before he decides its fate. The company's desired rate of return for present value computations is 12 percent. Expected
and actual cash flows follow. (PV of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided.)
Year 1
Year 2
Year 3
Year 4
Expected $3,400,000 $5,110,000 $4,630,000 $5,150,000
Actual 2,640,000 2,970,000 4,840,000 3,900,000
Year 5
$4,270,000
3,600,000
Required
a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. (Negative amounts
should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar.)
Net present value (expected)
Net present value (actual)
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