The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows. The net present value of the investment.

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Answer 1

Question

Chapter 8C, Problem 8C.1E

To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Expert Solution & Answer

Answer to Problem 8C.1E

The net present value of the investment is $145,511.

Explanation of Solution

The net present value of the investment is calculated as follows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Initial investment (I)	$ (2,000,000)
Net operating income (A)		$ 300,000	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Income tax (B) = (A*30%)		$ 90,000	$ 90,000	$ 90,000	$ 90,000	$ 90,000
Income after tax (C) = (A-B)		$ 210,000	$ 210,000	$ 210,000	$ 210,000	$ 210,000
Depreciation (D)		$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Cash inflows after tax (E) = (C+D)		$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
Net cash flows (F) = (I+E)	$ (2,000,000)	$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
PV of $ 1(13%) (G)	1.00000	0.88496	0.78315	0.69305	0.61332	0.54276
PV = F*G	$ (2,000,000)	$ 539,823	$ 477,719	$ 422,761	$ 374,124	$ 331,084
Net present value (Sum of PVs)	$ 145,511

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Answer 2

Question

Chapter 8C, Problem 8C.1E

To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Expert Solution & Answer

Answer to Problem 8C.1E

The net present value of the investment is $145,511.

Explanation of Solution

The net present value of the investment is calculated as follows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Initial investment (I)	$ (2,000,000)
Net operating income (A)		$ 300,000	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Income tax (B) = (A*30%)		$ 90,000	$ 90,000	$ 90,000	$ 90,000	$ 90,000
Income after tax (C) = (A-B)		$ 210,000	$ 210,000	$ 210,000	$ 210,000	$ 210,000
Depreciation (D)		$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Cash inflows after tax (E) = (C+D)		$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
Net cash flows (F) = (I+E)	$ (2,000,000)	$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
PV of $ 1(13%) (G)	1.00000	0.88496	0.78315	0.69305	0.61332	0.54276
PV = F*G	$ (2,000,000)	$ 539,823	$ 477,719	$ 422,761	$ 374,124	$ 331,084
Net present value (Sum of PVs)	$ 145,511

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Answer 3

Question

Chapter 8C, Problem 8C.1E

To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Expert Solution & Answer

Answer to Problem 8C.1E

The net present value of the investment is $145,511.

Explanation of Solution

The net present value of the investment is calculated as follows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Initial investment (I)	$ (2,000,000)
Net operating income (A)		$ 300,000	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Income tax (B) = (A*30%)		$ 90,000	$ 90,000	$ 90,000	$ 90,000	$ 90,000
Income after tax (C) = (A-B)		$ 210,000	$ 210,000	$ 210,000	$ 210,000	$ 210,000
Depreciation (D)		$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Cash inflows after tax (E) = (C+D)		$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
Net cash flows (F) = (I+E)	$ (2,000,000)	$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
PV of $ 1(13%) (G)	1.00000	0.88496	0.78315	0.69305	0.61332	0.54276
PV = F*G	$ (2,000,000)	$ 539,823	$ 477,719	$ 422,761	$ 374,124	$ 331,084
Net present value (Sum of PVs)	$ 145,511

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Answer 4

Question

Chapter 8C, Problem 8C.1E

To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Expert Solution & Answer

Answer to Problem 8C.1E

The net present value of the investment is $145,511.

Explanation of Solution

The net present value of the investment is calculated as follows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Initial investment (I)	$ (2,000,000)
Net operating income (A)		$ 300,000	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Income tax (B) = (A*30%)		$ 90,000	$ 90,000	$ 90,000	$ 90,000	$ 90,000
Income after tax (C) = (A-B)		$ 210,000	$ 210,000	$ 210,000	$ 210,000	$ 210,000
Depreciation (D)		$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Cash inflows after tax (E) = (C+D)		$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
Net cash flows (F) = (I+E)	$ (2,000,000)	$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
PV of $ 1(13%) (G)	1.00000	0.88496	0.78315	0.69305	0.61332	0.54276
PV = F*G	$ (2,000,000)	$ 539,823	$ 477,719	$ 422,761	$ 374,124	$ 331,084
Net present value (Sum of PVs)	$ 145,511

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Answer 5

Chapter 8C, Problem 8C.1E

To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Expert Solution & Answer

Answer to Problem 8C.1E

The net present value of the investment is $145,511.

Explanation of Solution

The net present value of the investment is calculated as follows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Initial investment (I)	$ (2,000,000)
Net operating income (A)		$ 300,000	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Income tax (B) = (A*30%)		$ 90,000	$ 90,000	$ 90,000	$ 90,000	$ 90,000
Income after tax (C) = (A-B)		$ 210,000	$ 210,000	$ 210,000	$ 210,000	$ 210,000
Depreciation (D)		$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Cash inflows after tax (E) = (C+D)		$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
Net cash flows (F) = (I+E)	$ (2,000,000)	$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
PV of $ 1(13%) (G)	1.00000	0.88496	0.78315	0.69305	0.61332	0.54276
PV = F*G	$ (2,000,000)	$ 539,823	$ 477,719	$ 422,761	$ 374,124	$ 331,084
Net present value (Sum of PVs)	$ 145,511

Answer 6

Chapter 8C, Problem 8C.1E

To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Expert Solution & Answer

Answer to Problem 8C.1E

The net present value of the investment is $145,511.

Explanation of Solution

The net present value of the investment is calculated as follows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Initial investment (I)	$ (2,000,000)
Net operating income (A)		$ 300,000	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Income tax (B) = (A*30%)		$ 90,000	$ 90,000	$ 90,000	$ 90,000	$ 90,000
Income after tax (C) = (A-B)		$ 210,000	$ 210,000	$ 210,000	$ 210,000	$ 210,000
Depreciation (D)		$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Cash inflows after tax (E) = (C+D)		$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
Net cash flows (F) = (I+E)	$ (2,000,000)	$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
PV of $ 1(13%) (G)	1.00000	0.88496	0.78315	0.69305	0.61332	0.54276
PV = F*G	$ (2,000,000)	$ 539,823	$ 477,719	$ 422,761	$ 374,124	$ 331,084
Net present value (Sum of PVs)	$ 145,511

Answer 7

Chapter 8C, Problem 8C.1E

To determine

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Answer 8

Expert Solution & Answer

Answer to Problem 8C.1E

The net present value of the investment is $145,511.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The net present value of the investment is calculated as follows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Initial investment (I)	$ (2,000,000)
Net operating income (A)		$ 300,000	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Income tax (B) = (A*30%)		$ 90,000	$ 90,000	$ 90,000	$ 90,000	$ 90,000
Income after tax (C) = (A-B)		$ 210,000	$ 210,000	$ 210,000	$ 210,000	$ 210,000
Depreciation (D)		$ 400,000	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Cash inflows after tax (E) = (C+D)		$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
Net cash flows (F) = (I+E)	$ (2,000,000)	$ 610,000	$ 610,000	$ 610,000	$ 610,000	$ 610,000
PV of $ 1(13%) (G)	1.00000	0.88496	0.78315	0.69305	0.61332	0.54276
PV = F*G	$ (2,000,000)	$ 539,823	$ 477,719	$ 422,761	$ 374,124	$ 331,084
Net present value (Sum of PVs)	$ 145,511

Answer 12

Ch. 8C - Prob. 8C.1E Ch. 8C - Prob. 8C.2E Ch. 8C - Prob. 8C.3P Ch. 8C - Prob. 8C.4P Ch. 8C - Income Taxes and Net Present Value Analysis...

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows. The net present value of the investment.

Concept explainers

Videos

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.

Answer to Problem 8C.1E

Explanation of Solution

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Chapter 8C Solutions

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows. The net present value of the investment.

Concept explainers

Videos

Concept Introduction: The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows. The net present value of the investment.

Answer to Problem 8C.1E

Explanation of Solution

Want to see more full solutions like this?

Chapter 8C Solutions

Concept Introduction:

The net present value if the net value of a project in today’s worth. The net present value of a project is the difference between the present value of future cash inflows and the present value of future cash outflows.

The net present value of the investment.