Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. 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 17,050 18,250 18,200 15,100 (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. $fill in the blank 1 B. What happens if the required rate of return increases? If the required rate of return increases, the NPV will be lower .
Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. 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 17,050 18,250 18,200 15,100 (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. $fill in the blank 1 B. What happens if the required rate of return increases? If the required rate of return increases, the NPV will be lower .
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
Section: Chapter Questions
Problem 1PS
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Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. 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 | 17,050 | 18,250 | 18,200 | 15,100 |
(Click here to see
A. What is the NPV of the investment? Round your present value factor to three decimal places and final answer to the nearest dollar.
$fill in the blank 1
B. What happens if the required
If the required rate of return increases, the NPV will be lower .
Transcribed Image Text:Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%.
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
17,050
18,250
18,200
15,100
(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, the NPV will be lower v
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