Ask Question
5 April, 10:53

Osler Company is considering an investment with the following dа ta: Initial cost $200,000 Annual net cash inflows $25,000 Expected life 10 years Salvage value none Depreciation will be taken on a straight-line basis over the expected life of the investment The company requires a minimum rate of return of 4%. What is the net present value of the investment? Period 1 2 3 4 5 6 7 8 9 10 4% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.773 7.435 8.111 a. ($81,830) b.$118,170 c.$202,775 d.$2,775

+5
Answers (1)
  1. 5 April, 14:49
    0
    d.$2,775

    Explanation:

    The computation of the net present value is shown below:

    = Present value of all yearly cash inflows after applying discount factor - initial investment

    where,

    The Present value would be

    = Annual net cash inflows * PVIFA at 4% for 10 years

    = $25,000 * 8.111

    = $202,775

    And, the initial investment is $200,000

    Now put these values to the above formula

    So, the value would equal to

    = $202,775 - $200,000

    = $2,775
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Osler Company is considering an investment with the following dа ta: Initial cost $200,000 Annual net cash inflows $25,000 Expected ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers