Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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![Required information
A potential investment has a cost of $380,000 and a useful life of 6 years. Annual cash sales from the investment are
expected to be $267,382 and annual cash operating expenses are expected to be $105,332. The expected salvage value
at the end of the investment's life is $40,000. The company has a before-tax discount rate of 15%.
Required:
Calculate the following. (Round dollar amounts to the nearest whole dollar and IRR to one decimal place (i.e. .055 = 5.5%). Enter
negative amounts with a minus sign.)
Annual PMT of the investment
FV of the investment
NPV of the investment
IRR of the investment
$ 162050
GA
69
40000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdd3f5c0e-287b-4c90-92ef-419f15feb161%2Fc3e5686b-6605-4737-a948-f2baa1a25339%2F60j7cza_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
A potential investment has a cost of $380,000 and a useful life of 6 years. Annual cash sales from the investment are
expected to be $267,382 and annual cash operating expenses are expected to be $105,332. The expected salvage value
at the end of the investment's life is $40,000. The company has a before-tax discount rate of 15%.
Required:
Calculate the following. (Round dollar amounts to the nearest whole dollar and IRR to one decimal place (i.e. .055 = 5.5%). Enter
negative amounts with a minus sign.)
Annual PMT of the investment
FV of the investment
NPV of the investment
IRR of the investment
$ 162050
GA
69
40000
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