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Home Q & A Board Science-Related Homework Help Mathematics
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majarm majarm
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6 years ago
A company is considering a project that will require a cost outlay of $17 200 per year for 3 years. At the end of the project the salvage value will be $15 000. The project will yield returns of $60 000 in Year 4 and $20 000 in Year 5. There are no returns after Year 5. Alternative investments are available that will yield a return of 14.2%. Should the company undertake the project?
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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#1
6 years ago
Outlays: PMT = $17 200; P/Y = C/Y = 1; I/Y = 14.2%; i = 0.0142
PVOUT = 17200 (1.142) -15000(1.142)-5 = 45449.8213 - 7722.5502 = 37 727.27
  = $37 727
  = 60000(1.142)-4 + 20000(1.142)-5 = 35276.6093 + 10296.7336 = 45 573.34
  = $45 573
NPV = 45 573 - 37 727 = $7 846 The company should undertake the project.
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