What is the net present value of an investment thatcosts $75,000 and has a sa lvage value of $45,000? The annualprofit from the investment is $15,000 each year for 5 years. Thecost of capital at this risk level is 12%.

What is the net present value of an investment thatcosts $75,000 and has a sa lvage value of $45,000? The annualprofit from the investment is $15,000 each year for 5 years. Thecost of capital at this risk level is 12%.

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

Problem 23E: Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The...

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Question

What is the net present value of an investment that
costs $75,000 and has a sa lvage value of $45,000? The annual
profit from the investment is $15,000 each year for 5 years. The
cost of capital at this risk level is 12%.

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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