Kurty Limited is considering an investment in a fixed asset which costs $378,000. The asset is expected to generate cash inflows of $108,000 each year for the next four years. The company intends to sell the asset at the end of year 4 for an estimated residual value of $26,000. The asset will be depreciated straight-line over the next four years. The discount rate for the project is 15%. Calculate the net present value.
Kurty Limited is considering an investment in a fixed asset which costs $378,000. The asset is expected to generate cash inflows of $108,000 each year for the next four years. The company intends to sell the asset at the end of year 4 for an estimated residual value of $26,000. The asset will be depreciated straight-line over the next four years. The discount rate for the project is 15%. Calculate the net present value.
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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Answer the following short questions:
(a) Kurty Limited is considering an investment in a fixed asset which costs $378,000. The asset is expected to generate
Calculate the
(b) Discuss the strengths and weaknesses of the payback period method of investment appraisal.
(c)Discuss the strengths and weaknesses of the NPV rule as a method of investment appraisal.
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