Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two-the B14 Model and the F54 Model. Financial data about the two choices follows. What is the total present value of future cash inflows and residual value from the F54 Model?
Present Value of $1
Present Value of Annuity of $1

Question

Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two-the B14 Model and the F54 Model. Financial data about the two choices follows.  What is the total present value of future cash inflows and residual value from the F54 Model?
Present Value of $1
 Present Value of Annuity of $1

Quizplus · Accepted Answer

To find the total present value of future cash inflows and residual value from the F54 Model, we need to first calculate the present value of the annual cash inflows and then add the residual value. Using the information provided, we can calculate the present value of the annual cash inflows for the F54 Model as follows:

Year 1: $80,000 x 4.037 = $322,960
Year 2: $80,000 x 3.433 = $274,640
Year 3: $80,000 x 2.913 = $233,040
Year 4: $80,000 x 2.466 = $197,280
Year 5: $80,000 x 2.080 = $166,400
Year 6: $80,000 x 1.748 = $139,840
Year 7: $80,000 x 1.464 = $117,120
Year 8: $80,000 x 1.225 = $98,000
Year 9: $80,000 x 1.025 = $82,000
Year 10: $80,000 x 0.857 = $68,560

Total Present Value of Annual Cash Inflows = $1,802,840

We can then add the residual value of $400,000 to get the total present value of future cash inflows and residual value from the F54 Model:

Total Present Value = $1,802,840 + $400,000 = $2,202,840

Therefore, the best choice is the F54 Model with a total present value of $2,202,840.

Cleveland Cove Enterprises Is Evaluating the Purchase of an Elaborate