Solution-Compute the net present value of the expected cash

Compute the net present value of the expected cash flows

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Reference no: EM132482969

Problem - All30BP Corp is reviewing the company's investment in a cement plant. The company paid $52,500,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company's discount rate for present value computations is 9%.

Expected and actual cash flows follow.

Year 1 $11,550,000 $9,450,000

Year 2 $ 17,220,000 $ 10,710,000

Year 3 $ 15,960,000 $ 17,220,000

Year 4 $ 17,430,000 $ 13,650,000

Year 5 $ 14,700,000 $ 12,600,000

Required -

1. Compute the net present value of the expected cash flows as of the beginning of the investment

2. Compute the net present value of the actual cash flows as of the beginning of the investment.

3. What do you conclude from this post audit?

Set up a mini table of present value factors to make your calculations easier.

Reference no: EM132482969

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Compute the net present value of the expected cash flows

Reference no: EM132482969

Reference no: EM132482969

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