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 net present value of the B14 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 net present value of the B14 Model?
Present Value of $1
 Present Value of Annuity of $1

Quizplus · Accepted Answer

To find the net present value (NPV) of the B14 model, we first need to calculate the present value of its cash inflows and outflows. Using the provided information, we can calculate the NPV as follows:

NPV = -C0 + (C1/1+i) + (C2/1+i)^2 + (C3/1+i)^3 + (C4/1+i)^4 + (C5/1+i)^5

NPV = -250,000 + (92,400/1+0.09) + (92,400/1+0.09)^2 + (92,400/1+0.09)^3 + (92,400/1+0.09)^4 + (92,400/1+0.09)^5

NPV = $11,880 positive

Therefore, the B14 Model has a positive NPV, indicating that it would be a profitable investment for Cleveland Cove Enterprises. The F54 Model does not provide any financial data to determine its NPV, so it cannot be compared to the B14 Model in this analysis.

Cleveland Cove Enterprises Is Evaluating the Purchase of an Elaborate