e net present value

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...
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Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield
the following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use
appropriate factor(s) from the tables provided.)
Year
1
2
3
4
5
Net cash
Flow
$ 47,900
53,700
75,600
95,500
126, 200
Required:
1. Determine the payback period for this investment.
2. Determine the break-even time for this investment.
3. Determine the net present value for this investment.
4. Should management invest in this project based on net present value?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3 Required 4
Determine the payback period for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer
to 1 decimal place.)
Year
Initial investment
Year 1
Year 2
Year 3
Year 4
Year 5
Payback period =
Net Cash
Flows
$
(250,000)
47,900
53,700
75,600
95,500
126,200
Cumulative Net
Cash Flows
<
Required 1
Required 2 >
Transcribed Image Text:Salsa Company is considering an investment in technology to improve its operations. The investment costs $250,000 and will yield the following net cash flows. Management requires a 9% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 2 3 4 5 Net cash Flow $ 47,900 53,700 75,600 95,500 126, 200 Required: 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. 4. Should management invest in this project based on net present value? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the payback period for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place.) Year Initial investment Year 1 Year 2 Year 3 Year 4 Year 5 Payback period = Net Cash Flows $ (250,000) 47,900 53,700 75,600 95,500 126,200 Cumulative Net Cash Flows < Required 1 Required 2 >
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ISBN:
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