Sky High Company is considering the purchase of an investment of $250,000. Data related to the investment are as follows:
Cash flows (at the end of the next four years) $125,000
Salvage value $25,000
Tax Rate 21%
With a discount rate of 9%, what is the net present value of the investment.

Question

Quizplus · Accepted Answer

($125,000 x 3.23972 x (1 - .21)) + ((($250,000 - $25,000) ÷ 4) x 3.23972 x .21) + ($25,000 * .708430) - $250,000 = $125,902
(Cash flows x PVAF, n 4, i=9% x (1-tax rate)) + (((cost - sal. val.) ÷ years) x PVAF, n 4, i=9% x tax rate) + (sal. val x PVIF, n 4, i = 9%) - cost

Sky High Company Is Considering the Purchase of an Investment