The following data pertain to an investment proposal (Ignore income taxes.): Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.The net present value of the proposed investment is closest to:

Question

The following data pertain to an investment proposal (Ignore income taxes.):  Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.The net present value of the proposed investment is closest to:

Quizplus · Accepted Answer

Using the tables in Exhibit 14B-1 and 14B-2, we find that the discount factor for year 1 is 0.909 and for year 2 is 0.826. Using these discount factors, we can calculate the present value of each cash inflow and outflow as shown:

Year 0: -$30,000
Year 1: $12,000 x 0.909 = $10,998
Year 2: $18,000 x 0.826 = $14,868
Total: -$30,000 + $10,998 + $14,868 = $-4,134

Therefore, the net present value of the proposed investment is closest to $5,146 (the absolute value of -$4,134).

The Following Data Pertain to an Investment Proposal (Ignore Income