Bonita Inc. is considering a capital investment proposal that costs $227,500 and has an estimated life of four years and no residual value. The estimated net cash flows are as follows: Year Net Cash Flow$97,50080,00060,00040,000The minimum desired rate of return for net present value analysis is 10%. The present value of $1 at compound interest rates of 10% for 1,2,3, and 4 years is .909, .826, .751, and .683, respectively. Determine the net present value.

Net present value is the sum of future cashflows - initial investment

Answered: Bonita Inc. is considering a capital…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

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Bonita Inc. is considering a capital investment proposal that costs $227,500 and has an estimated life of four years and no residual value. The estimated net cash flows are as follows:

Year Net Cash Flow

$97,500
80,000
60,000
40,000

The minimum desired rate of return for net present value analysis is 10%. The present value of $1 at compound interest rates of 10% for 1,2,3, and 4 years is .909, .826, .751, and .683, respectively. Determine the net present value.

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