Determine the net present value, and indicate whether the investment should be made.

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

Hsung Company accumulates the following data concerning a proposed capital investment: cash cost $215,000, net annual cash flows $40,000, present value factor of cash inflows for 10 years 5.65 (rounded).

Apr 8th, 2015

Net present value = 40000*5.65 = $226,000

This is based on discount factor 12%

Initial investment =$215,000 < $226,000 it is profitable to go ahead with this project.

IRR =13.2% > 12%. Hence the project is worthwhile

Apr 8th, 2015

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