Osler Company is considering an investment with the following data: Initial cost $200,000 Annual net cash inflows $25,000 Expected life 10 years Salvage value none Depreciation will be taken on a straight-line basis over the expected life of the investment The company requires a minimum rate of return of 4%. What is the net present value of the investment? Period 1 2 3 4 5 6 7 8 9 10 4% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.773 7.435 8.111
Osler Company is considering an investment with the following data: Initial cost $200,000 Annual net cash inflows $25,000 Expected life 10 years Salvage value none Depreciation will be taken on a straight-line basis over the expected life of the investment The company requires a minimum rate of return of 4%. What is the net present value of the investment? Period 1 2 3 4 5 6 7 8 9 10 4% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.773 7.435 8.111
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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Osler Company is considering an investment with the following data:
Depreciation will be taken on a straight-line basis over the expected life of the investment
The company requires a minimumrate of return of 4%. What is the net present value of the investment?
| Initial cost | $200,000 |
| Annual net |
$25,000 |
| Expected life | 10 years |
| Salvage value | none |
The company requires a minimum
| Period | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| 4% | 0.962 | 1.886 | 2.775 | 3.630 | 4.452 | 5.242 | 6.002 | 6.773 | 7.435 | 8.111 |
a.$118,170
b.$2,775
c.($81,830)
d.$202,775
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