Randel Company is evaluating a capital expenditure proposal that has the following predicted cash flows:
$$\begin{array} { l r }
\text { Initial investment } & \$ 45,110 \
\text { Operation } & \
\quad\text { Year 1 } & 20,640 \
\quad\text { Year 2 } & 30,000 \
\quad\text { Year 3 } & 10,000 \
\text { Salvage value } & 0
\end{array}$$ The present value factors of $1 for different rates of return are as follows:
$$\begin{array} { c c c c c }
\text { Present Value of } \$ 1 \
\end{array}\
\begin{array} { c c c c c }
\hline \text { Period } & 12 \% & 14 \% & 16 \% & 18 \% \
\hline 1 & 0.89286 & 0.87719 & 0.86207 & 0.84746 \
2 & 0.79719 & 0.76947 & 0.74316 & 0.71818 \
3 & 0.71178 & 0.67497 & 0.64066 & 0.60863 \
4 & 0.63552 & 0.59208 & 0.55229 & 0.51579
\end{array}$$ Given a discount rate of 14 percent, determine the net present value of the investment proposal.

Question

Randel Company is evaluating a capital expenditure proposal that has the following predicted cash flows:
$$\begin{array} { l r } 
\text { Initial investment } & \$ 45,110 \
\text { Operation } & \
\quad\text { Year 1 } & 20,640 \
\quad\text { Year 2 } & 30,000 \
\quad\text { Year 3 } & 10,000 \
\text { Salvage value } & 0
\end{array}$$ The present value factors of $1 for different rates of return are as follows:
$$\begin{array} { c c c c c } 
\text { Present Value of } \$ 1  \
\end{array}\
\begin{array} { c c c c c } 
\hline \text { Period } & 12 \% & 14 \% & 16 \% & 18 \% \
\hline 1 & 0.89286 & 0.87719 & 0.86207 & 0.84746 \
2 & 0.79719 & 0.76947 & 0.74316 & 0.71818 \
3 & 0.71178 & 0.67497 & 0.64066 & 0.60863 \
4 & 0.63552 & 0.59208 & 0.55229 & 0.51579
\end{array}$$ Given a discount rate of 14 percent, determine the net present value of the investment proposal.

Quizplus · Accepted Answer

The Answer of Randel Company is evaluating a capital expenditure proposal that has the following predicted cash flows:
$$\begin{array} { l r } 
\text { Initial investment } & \$ 45,110 \
\text { Operation } & \
\quad\text { Year 1 } & 20,640 \
\quad\text { Year 2 } & 30,000 \
\quad\text { Year 3 } & 10,000 \
\text { Salvage value } & 0
\end{array}$$ The present value factors of $1 for different rates of return are as follows:
$$\begin{array} { c c c c c } 
\text { Present Value of } \$ 1  \
\end{array}\
\begin{array} { c c c c c } 
\hline \text { Period } & 12 \% & 14 \% & 16 \% & 18 \% \
\hline 1 & 0.89286 & 0.87719 & 0.86207 & 0.84746 \
2 & 0.79719 & 0.76947 & 0.74316 & 0.71818 \
3 & 0.71178 & 0.67497 & 0.64066 & 0.60863 \
4 & 0.63552 & 0.59208 & 0.55229 & 0.51579
\end{array}$$ Given a discount rate of 14 percent, determine the net present value of the investment proposal.

Randel Company Is Evaluating a Capital Expenditure Proposal That Has