Present Value: Present value explains that how much a future sum of money is value today. At the time of computing present values by using tables these things are required to be considered, first is the ‘annual rate or periodic interest rates’ then second one is the ‘number of years or the number of discounting periods’ involved in it. Cash flow : Cash flow refers to the incoming of cash and outgoing of cash due to operating activities of any business. Incoming of cash is known as cash inflow and outgoing of cash is called cash outflow .

Question

Want to see the full answer?

Answer 1

Question

Chapter 12, Problem 3F15

To determine

Present Value:

Present value explains that how much a future sum of money is value today.

At the time of computing present values by using tables these things are required to be considered, first is the ‘annual rate or periodic interest rates’ then second one is the ‘number of years or the number of discounting periods’ involved in it.

Cash flow:

Cash flow refers to the incoming of cash and outgoing of cash due to operating activities of any business. Incoming of cash is known as cash inflow and outgoing of cash is called cash outflow.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Harrison Company is considering taking on a project that requires an initial cost of $180,000. The project has a lifespan of two (2) years, after which after two years the project has no salvage value. The possible incremental after-tax cash flows and their probabilities can be seen in the following table. The required return by the company for this investment is 8%. Questions :a). The expected net present value of this projectb). If it is possible to abandon (abandonment) this project and the abandonment value at the end of the first year is $90,000 after tax. For this project, is abandonment of this project after one year is the right choice? Calculate the expected net present value, assuming that the company would abandon the project if it were useful. Compare with the calculations in the answer to part (a). What are the implications if you are a financial manager?

Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 14%. The project would provide net operating income in each of five years as follows: Required: (Answer each question by referring 10 the original data unless instructed otherwise.) 1. Which item(s) in the income statement shown above will not affect cash flows? 2. What are the project’s annual net cash inflows? 3. What is the present value of the project’s annual net cash inflows? 4. What is the project’s net present value? 5. What is the project profitability index for this project? (Round your answer to the nearest whole percent.) 6. What is the project’s internal rate of return to the nearest whole percent? 7. What is the project’s payback period? 8. What is the project’s simple rate of return for each of the five years? 9. If the company’s discount rate was 16% instead of 14%, would you…

Cadillac Company is evaluating an investment that would have an eight-year life and would require a P300,000 purchase of equipment which has no salvage value. The project has the following additional information : Sales, P500,000; Cash Variable Expenses, P200,000; Fixed cash expenses, P150,000; Depreciation expense, P37,500. If the company's required rate of return is 10%, what is the payback period of the investment. A. 3 years B. 2 years C. 2.5 years D. 2.67 years