Gallatin, Incorporated, has assembled the estimates shown below relating to a proposed new product. These estimates are based on a 5-year project life, at the end of which the new equipment would be sold, working capital would revert to other uses in the company, and the product would be discontinued. Gallatin uses a discount rate of 10%. (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.Required:Compute the net present value of the new product.

Question

Gallatin, Incorporated, has assembled the estimates shown below relating to a proposed new product. These estimates are based on a 5-year project life, at the end of which the new equipment would be sold, working capital would revert to other uses in the company, and the product would be discontinued. Gallatin uses a discount rate of 10%. (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.Required:Compute the net present value of the new product.

Quizplus · Accepted Answer

The Answer of Gallatin, Incorporated, has assembled the estimates shown below relating to a proposed new product. These estimates are based on a 5-year project life, at the end of which the new equipment would be sold, working capital would revert to other uses in the company, and the product would be discontinued. Gallatin uses a discount rate of 10%. (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.Required:Compute the net present value of the new product.

Gallatin, Incorporated, Has Assembled the Estimates Shown Below Relating to a Proposed