Shelton Tax Services is considering investing in new software for their corporate tax business. The investment will require an outlay of $350,000 initially, and is expected to generate the following after-tax cash flows: Year 1, $60,000; Year 2, $80,000; Year 3, $105,000; Year 4, $120,000; Year 5, $145,000. Shelton uses a discount rate of 10%.
What is the Net Present Value of the proposed investment? (Use the tables in Appendix A to determine the appropriate discount factor and round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

Discounted Cash Flows: Year 0: ($350,000)
Year 1: $ 60,000 × 0.90909 = $54,545.40
Year 2: $ 80,000 × 0.82645 = $66,116.00
Year 3: $105,000 × 0.75131 = $78,887.55
Year 4: $120,000 × 0.68301 = $81,961.20
Year 5: $145,000 × 0.62092 = $90,033.40
NPV: $21,544 (rounded)

Shelton Tax Services Is Considering Investing in New Software for Their