In Year 1, Darw Inc. purchased equipment with an expected useful life of 5 years. The initial cost of the equipment was $85,000. Darw Inc.cost of capital is 12%. At the time it purchased the equipment, Darw Inc. projected the following cash inflows from use of the equipment: Year Projected Cash Inflow 1 $20,000 2 $30,000 3 $35,000 4 $25,000 5 $15,000 At the end of Year 5, the equipment had reached the end of its useful life. Darw Inc.determined that it had actually generated the following cash flows: Year Actual Cash Inflow $10,000 $20,000 $30,000 $30,000 $30,000 1) What was the net present value that Darw Inc. calculated for the equipment when the company purchased the asset?
In Year 1, Darw Inc. purchased equipment with an expected useful life of 5 years. The initial cost of the equipment was $85,000. Darw Inc.cost of capital is 12%. At the time it purchased the equipment, Darw Inc. projected the following cash inflows from use of the equipment: Year Projected Cash Inflow 1 $20,000 2 $30,000 3 $35,000 4 $25,000 5 $15,000 At the end of Year 5, the equipment had reached the end of its useful life. Darw Inc.determined that it had actually generated the following cash flows: Year Actual Cash Inflow $10,000 $20,000 $30,000 $30,000 $30,000 1) What was the net present value that Darw Inc. calculated for the equipment when the company purchased the asset?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In Year 1, Darw Inc. purchased equipment with an expected useful life of 5 years. The initial cost of the equipment was $85,000. Darw Inc.cost of capital is 12%. At the time it purchased the equipment, Darw Inc. projected the following cash inflows from use of the equipment:
| Year Projected |
|
| 1 | $20,000 |
| 2 | $30,000 |
| 3 | $35,000 |
| 4 | $25,000 |
| 5 | $15,000 |
At the end of Year 5, the equipment had reached the end of its useful life. Darw Inc.determined that it had actually generated the following
| Year Actual Cash Inflow |
| $10,000 |
| $20,000 |
| $30,000 |
| $30,000 |
| $30,000 |
1) What was the
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