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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 35
(2010 CPA Exam, adapted) Salem Co. is considering a project that yields annual net cash inflows of $420,000 for years 1 through 5, and a net cash inflow of $100,000 in year 6. The project will require an initial investment of $1,800,000. Salem's cost of capital is 10 percent. Present value information is presented below:
Present value of $1 for five years at 10 percent is 0.62.
Present value of $1 for six years at 10 percent is 0.56.
Present value of an annuity of $1 for five years at 10 percent is 3.79.
What was Salem's expected net present value for this project?
A) $83,000
B) ($108,200)
C) ($152,200)
D) ($442,000)
Present value of $1 for five years at 10 percent is 0.62.
Present value of $1 for six years at 10 percent is 0.56.
Present value of an annuity of $1 for five years at 10 percent is 3.79.
What was Salem's expected net present value for this project?
A) $83,000
B) ($108,200)
C) ($152,200)
D) ($442,000)
Explanation
Verified
Verified
The net present value (NPV) is the prese...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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