Gibson Company is considering investing in two new vans that are expected to generate combined cash inflows of $29,500 per year. The vans’ combined purchase price is $95,500. The expected life and salvage value of each are six years and $21,200, respectively. Gibson has an average cost of capital of 12 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.) Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.
Exercise 10-5A (Algo) Determining net present value LO 10-2
Gibson Company is considering investing in two new vans that are expected to generate combined
Required
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Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.)
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Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.
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