Cost of capital and investments net present value

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Reference no: EM13792295

Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:

Cost of Capital

Period 8% 10% 12% 14% 16%

2 1.78 1.74 1.69 1.65 1.61

3 2.58 2.49 2.40 2.32 2.25

4 3.31 3.17 3.04 2.91 2.80

The investment's net present value is:

$ 5,480

$19,200

$76,800

$ 8,981

Reference no: EM13792295

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