Morrisey Company has two investment opportunities. Both investments cost $5,500 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below: What is the net present value of Investment II assuming an 8% minimum rate of return? Use Appendix Table 2. (Do not round your intermediate calculations. Round your answer to nearest whole dollar.)

Question

Morrisey Company has two investment opportunities. Both investments cost $5,500 and will provide the same total future cash inflows. The cash receipt schedule for each investment is given below:  What is the net present value of Investment II assuming an 8% minimum rate of return? Use Appendix Table 2. (Do not round your intermediate calculations. Round your answer to nearest whole dollar.)

Quizplus · Accepted Answer

Net present value = (Expected cash flows × PV factor) - Cost of investment
Net present value = [($1,000 × 0.925926) + ($2,000 × 0.857339) + ($3,000 × 0.793832) + ($2,000 × 0.735030)] - $5,500 = $992 (rounded)
PV factors (n = 1, 2, 3, and 4, respectively, i = 8)

Morrisey Company Has Two Investment Opportunities