Lana Powell is seeking part-time employment while she teaches school. She is considering purchasing technical equipment that will enable her to start a small training services company that will offer tutorial services over the internet. Lana expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, she expects demand to stabilize. The following table presents the expected cash flows. Cash Inflow Cash Outflow $6,500 $4,000 4,500 3,000 2012 7,000 4,200 4,200 2013 7,000 In addition to these cash flows, Ms Powell expects to pay $7,300 for the equipment. She also expects to pay $1,200 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $750 salvage value and a four-year useful life. Ms Powell desires to earn a rate of return of 10 percent. What is the Present value of the net cash flow at the end of 2013? (Round computations to the nearest whole penny). Year of Operation 2010 2011
Lana Powell is seeking part-time employment while she teaches school. She is considering purchasing technical equipment that will enable her to start a small training services company that will offer tutorial services over the internet. Lana expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, she expects demand to stabilize. The following table presents the expected cash flows. Cash Inflow Cash Outflow $6,500 $4,000 4,500 3,000 2012 7,000 4,200 4,200 2013 7,000 In addition to these cash flows, Ms Powell expects to pay $7,300 for the equipment. She also expects to pay $1,200 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $750 salvage value and a four-year useful life. Ms Powell desires to earn a rate of return of 10 percent. What is the Present value of the net cash flow at the end of 2013? (Round computations to the nearest whole penny). Year of Operation 2010 2011
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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Transcribed Image Text:question #129
Lana Powell is seeking part-time employment while she teaches school. She is considering purchasing technical equipment that will
enable her to start a small training services company that will offer tutorial services over the internet. Lana expects demand for the
service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter,
she expects demand to stabilize. The following table presents the expected cash flows.
Cash Inflow
Cash Outflow
$6,500
$4,000
4,500
3,000
2012
7,000
4,200
4,200
2013
7,000
In addition to these cash flows, Ms Powell expects to pay $7,300 for the equipment. She also expects to pay $1,200 for a major
overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $750
salvage value and a four-year useful life. Ms Powell desires to earn a rate of return of 10 percent.
What is the Present value of the net cash flow at the end of 2013? (Round computations to the nearest whole penny).
Year of Operation
2010
2011
Multiple Choice
$1,912
Transcribed Image Text:salvage value and a four-year useful life. Ms Powell desires to earn a rate.of return of 10 percent.
What is the Present value of the net cash flow at the end of 2013? (Round computations to the nearest whole penny).
Multiple Choice
O $1,912
$2,425
none of the above
$8,876
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