The Pina Colada Company is planning to purchase $458,000 of equipment with an estimated 7-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment: Projected Cash Year Flows $236,000 2 141,000 3 125,000 4 55,500 60,400 44,800 7 46,900 Total $709,600 Click here to view the factor table. Calculate the net present value of the proposed equipment purchase. Pina Colada uses a 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, eg. 58,971.) Net present value
The Pina Colada Company is planning to purchase $458,000 of equipment with an estimated 7-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment: Projected Cash Year Flows $236,000 2 141,000 3 125,000 4 55,500 60,400 44,800 7 46,900 Total $709,600 Click here to view the factor table. Calculate the net present value of the proposed equipment purchase. Pina Colada uses a 7% discount rate. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, eg. 58,971.) Net present value
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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100%
Chapter 9 Question 5
Please help me find the answer with an explanation.
Transcribed Image Text:APPENDIX 9.1 Present value of $1 received in n periods.
Periods
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
16%
18%
20%
1
0.9615
0.9524
0.9434 0.9346 0.9259 0.9174
0.9091 0.9009 0.8929 0.8850
0.8772
0.8621 0.8475
0.8333
0.9246
0.9070
0.8900
0.8734
0.8573 0.8417
0.8264 0.8116 0.7972 0.7831
0.7695
0.7432 0.7182
0.6944
3
0.8890
0.8638
0.8396
0.8163
0.7938
0.7722
0.7513 0.7312 0.7118 0.6931
0.6750
0.6407
0.6086
0.5787
4
0.8548
0.8227
0.7921
0.7629 0.7350
0.7084
0.6830 0.6587 0.6355 0.6133
0.5921
0.5523
0.5158 0.4823
0.8219
0.7835
0.7473 0.7130 0.6806 0.6499
0.6209 0.5935 0.5674
0.5428
0.5194
0.4761 0.4371
0.4019
6.
0.7903
0.7462
0.7050
0.6663
0.6302
0.5963
0.5645
0.5346
0.5066
0.4803
0.4556
0.4104
0.3704
0.3349
7
0.7599
0.7107
0.6651
0.6227
0.5835
0.5470
0.5132
0.4817
0.4523
0.4251
0.3996
0.3538
0.3139
0.2791
0.7307
0.6768
0.6274
0.5820
0.5403
0.5019 0.4665
0.4339
0.4039
0.3762
0.3506
0.3050
0.2660
0.2326
0.7026
0.6446
0.5919
0.5439
0.5002
0.4604
0.4241
0.3909
0.3606
0.3329
0.3075
0.2630
0.2255
0.1938
10
0.6756
0.6139
0.5584
0.5083
0.4632
0.4224
0.3855
0.3522
0.3220
0.2946
0.2697
0.2267
0.1911
0.1615
11
0.6496
0.5847
0.5268
0.4751
0.4289
0.3875 0.3505 0.3173 0.2875
0.2607
0.2366
0.1954
0.1619
0.1346
12
0.6246
0.5568
0.4970
0.4440
0.3971
0.3555 0.3186 0.2858 0.2567
0.2307
0.2076 0.1685 0.1372 0.1122
13
0.6006
0.5303
0.4688
0.4150
0.3677
0.3262 0.2897 0.2575 0.2292 0.2042
0.1821
0.1452 0.1163
0.0935
14
0.5775
0.5051
0.4423
0.3878
0.3405
0.2992
0.2633
0.2320
0.2046
0.1807
0.1597 0.1252
0.0985
0.0779
15
0.5553
0.4810
0.4173
0.3624 0.3152
0.2745 0.2394
0.2090
0.1827
0.1599
0.1401
0.1079 0.0835 0.0649
16
0.5339
0.4581
0.3936
0.3387
0.2919
0.2519 0.2176
0.1883
0.1631
0.1415
0.1229 0.0930 0.0708 0.0541
17
0.5134
0.4363
0.3714
0.3166
0.2703
0.2311 0.1978
0.1696
0.1456 0.1252 0.1078 0.0802 0.0600
0.0451
18
0.4936
0.4155
0.3503
0.2959
0.2502
0.2120 0.1799
0.1528
0.1300
0.1108
0.0946
0.0691
0.0508
0.0376
19
0.4746
0.3957
0.3305
0.2765 0.2317
0.1945 0.1635 0.1377
0.1161
0.0981
0.0829 0.0596 0.0431 0.0313
20
0.4564
0.3769
0.3118
0.2584
0.2145
0.1784 0.1486
0.1240
0.1037
0.0868
0.0728
0.0514
0.0365
0.0261
$1
PVn.
(1+ i)"
Transcribed Image Text:The Pina Colada Company is planning to purchase $458,000 of equipment with an estimated 7-year life and no estimated salvage
value. The company has projected the following annual cash flows for the investment:
Projected Cash
Year
Flows
1.
$236,000
141,000
3
125,000
4
55,500
5
60,400
6
44,800
7
46,900
Total
$709,600
Click here to view the factor table.
Calculate the net present value of the proposed equipment purchase. Pina Colada uses a 7% discount rate. (For calculation purposes,
use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.)
Net present value
$
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