Investment Option "South" This potential investment is less risky and shorter term, so it has a minimum rate of return of 8.20%. This investment would require an initial outlay of cash of $137,500, and at the end of the 4-year life of this investment SUD Corporation is expected to have to pay a wind-down cost of $20,625. For the first 3 years of this investment, net annual cash inflows are expected to be $28,750 and for the last year of the investment, the net annual cash inflow is expected to be $71,875. 6. How much is the present value of the purchase of equipment? 7. How much is the present value of the wind- down cost? 8. How much is the present value of the annual cash inflows for the first 3 years? 9. How much is the present value of the annual cash inflow for the final year of this investment? 10. How much is the Net Present Value? 11. What is the Internal Rate of Return? (round to the nearest hundredths place/input code: 0.00) $ $ $ %
Investment Option "South" This potential investment is less risky and shorter term, so it has a minimum rate of return of 8.20%. This investment would require an initial outlay of cash of $137,500, and at the end of the 4-year life of this investment SUD Corporation is expected to have to pay a wind-down cost of $20,625. For the first 3 years of this investment, net annual cash inflows are expected to be $28,750 and for the last year of the investment, the net annual cash inflow is expected to be $71,875. 6. How much is the present value of the purchase of equipment? 7. How much is the present value of the wind- down cost? 8. How much is the present value of the annual cash inflows for the first 3 years? 9. How much is the present value of the annual cash inflow for the final year of this investment? 10. How much is the Net Present Value? 11. What is the Internal Rate of Return? (round to the nearest hundredths place/input code: 0.00) $ $ $ %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Investment Option "South"
This potential investment is less risky and shorter term, so it has a minimum rate of
return of 8.20%. This investment would require an initial outlay of cash of $137,500,
and at the end of the 4-year life of this investment SUD Corporation is expected to
have to pay a wind-down cost of $20,625. For the first 3 years of this investment, net
annual cash inflows are expected to be $28,750 and for the last year of the
investment, the net annual cash inflow is expected to be $71,875.
6. How much is the
present value of the
purchase of equipment?
7. How much is the
present value of the wind-
down cost?
8. How much is the
present value of the
annual cash inflows for
the first 3 years?
9. How much is the
present value of the
annual cash inflow for the
final year of this
investment?
10. How much is the Net
Present Value?
11. What is the Internal
Rate of Return? (round to
the nearest hundredths
place/input code: 0.00)
Show Transcribed Text
tA
$
$
tA
$
%
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