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Falkland, Inc., is considering the purchase of a patent that has a cost of $49,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 10%. The patent is expected to generate the following amounts of annual income and cash flows: https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar. $ _____ B. What happens if the required rate of return increases? If the required rate of return increases, ______

Falkland, Inc., is considering the purchase of a patent that has a cost of $49,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 10%. The patent is expected to generate the following amounts of annual income and cash flows: https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar. $ _____ B. What happens if the required rate of return increases? If the required rate of return increases, ______

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
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Falkland, Inc., is considering the purchase of a patent that has a cost of $49,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 10%. The patent is expected to generate the following amounts of annual income and cash flows:

https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money

A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar.

$ _____

B. What happens if the required rate of return increases?

If the required rate of return increases, ______

Falkland, Inc., is considering the purchase of a patent that has a cost of $49,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 10%. The patent is expected to generate the following amounts of annual income and cash flows: Year 1 Year 2 Year 3 Year 4 Net income $5,100 $6,500 $6,300 $3,000 Operating cash flows 16,800 18,300 18,150 14,950 (Click here to see present value and future value tables) A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar. B. What happens if the required rate of return increases? If the required rate of return increases,
Transcribed Image Text:Falkland, Inc., is considering the purchase of a patent that has a cost of $49,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 10%. The patent is expected to generate the following amounts of annual income and cash flows: Year 1 Year 2 Year 3 Year 4 Net income $5,100 $6,500 $6,300 $3,000 Operating cash flows 16,800 18,300 18,150 14,950 (Click here to see present value and future value tables) A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar. B. What happens if the required rate of return increases? If the required rate of return increases,
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