P 9-1 Investment Scenarios (LO 9-3) Arkansas Best Freightways is considering a purchase of three different potential trucks. it is considering three different investment scenarios and their respective cash flows. Arkansas Best Freightways use a cost of capital of 9 percent to evaluate the investments. Year Year (today) Year 1 Year 2 Year 3 Year 4 Buy new truck Increased profits Increased profits Increased profits Increased profits Investment 1 (85,000) 25,000 25,000 25,000 25,000 Net cash flows over life (not discounted) Investment 2 (105,000) 20,000 30,000 40,000 50,000 Investment 3 (125,000) 40,000 Answer is complete and correct. Investment 2 Investment 1 15.000 35,000 30,000 20,000 10,000 Required: 1. Calculate the net cash flows (not discounted) over the life of the three investments (years 0 to 4). (Negative amounts should be entered using a minus sign.) Investment 3 Cost of Capital 9% (25.000)
P 9-1 Investment Scenarios (LO 9-3) Arkansas Best Freightways is considering a purchase of three different potential trucks. it is considering three different investment scenarios and their respective cash flows. Arkansas Best Freightways use a cost of capital of 9 percent to evaluate the investments. Year Year (today) Year 1 Year 2 Year 3 Year 4 Buy new truck Increased profits Increased profits Increased profits Increased profits Investment 1 (85,000) 25,000 25,000 25,000 25,000 Net cash flows over life (not discounted) Investment 2 (105,000) 20,000 30,000 40,000 50,000 Investment 3 (125,000) 40,000 Answer is complete and correct. Investment 2 Investment 1 15.000 35,000 30,000 20,000 10,000 Required: 1. Calculate the net cash flows (not discounted) over the life of the three investments (years 0 to 4). (Negative amounts should be entered using a minus sign.) Investment 3 Cost of Capital 9% (25.000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![P 9-1 Investment Scenarios (LO 9-3)
Arkansas Best Freightways is considering a purchase of three different potential trucks. it is considering three different investment
scenarios and their respective cash flows. Arkansas Best Freightways use a cost of capital of 9 percent to evaluate the investments.
Year
Year 0 (today)
Year 1
Year 2
Year 3
Year 4
Buy new truck
Increased profits
Increased profits
Increased profits
Increased profits
Net cash flows over life (not discounted)
Investment 1
(85,000)
25,000
25,000
25,000
25,000
$
Investment 2
(105,000)
20,000
30,000
40,000
50,000
Required:
1. Calculate the net cash flows (not discounted) over the life of the three investments (years 0 to 4). (Negative amounts should be
entered using a minus sign.)
Answer is complete and correct.
Investment 1
15,000
Investment 2
$
Investment 3
(125,000)
40,000
30,000
20,000
10,000
Investment 3
(25,000)
35,000 S
Cost of
Capital
9%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb7d25a8-15b5-4497-b28c-29fb581defd5%2Ff88afa9f-20ac-4823-95a0-9b09a88babb1%2Fr5uh973_processed.jpeg&w=3840&q=75)
Transcribed Image Text:P 9-1 Investment Scenarios (LO 9-3)
Arkansas Best Freightways is considering a purchase of three different potential trucks. it is considering three different investment
scenarios and their respective cash flows. Arkansas Best Freightways use a cost of capital of 9 percent to evaluate the investments.
Year
Year 0 (today)
Year 1
Year 2
Year 3
Year 4
Buy new truck
Increased profits
Increased profits
Increased profits
Increased profits
Net cash flows over life (not discounted)
Investment 1
(85,000)
25,000
25,000
25,000
25,000
$
Investment 2
(105,000)
20,000
30,000
40,000
50,000
Required:
1. Calculate the net cash flows (not discounted) over the life of the three investments (years 0 to 4). (Negative amounts should be
entered using a minus sign.)
Answer is complete and correct.
Investment 1
15,000
Investment 2
$
Investment 3
(125,000)
40,000
30,000
20,000
10,000
Investment 3
(25,000)
35,000 S
Cost of
Capital
9%
![2. Calculate the present value for each of the three possible investments over years 1 through 4, using the 9 percent cost of capital as
the interest (or discount) rate. (Round your answer to 2 decimal places. Use the Excel NPV() function to calculate the present value
for each of the three possible investments.)
Present Value
S
Answer is not complete.
Investment 2
80,993.00 $ 119,350.00
Investment 1
Investment 3](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb7d25a8-15b5-4497-b28c-29fb581defd5%2Ff88afa9f-20ac-4823-95a0-9b09a88babb1%2Fqic7dlg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:2. Calculate the present value for each of the three possible investments over years 1 through 4, using the 9 percent cost of capital as
the interest (or discount) rate. (Round your answer to 2 decimal places. Use the Excel NPV() function to calculate the present value
for each of the three possible investments.)
Present Value
S
Answer is not complete.
Investment 2
80,993.00 $ 119,350.00
Investment 1
Investment 3
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