Reference no: EM132373561
The purchase of a new machine. The positive cash flows, exceed the initial outlay by $20,000 by the end of year 4, will bring both praise and approval. The copany uses a 12% discount rate for cash flows and projected related budgeting. Present the NVP model used to assess product proposal. The data is below.
Day 1 cash out -$70,000 12% discount rate applied
End year 1 cash repayment. $10,000
End year 2 cash payment. $20,000
End year 3 cash payment. $30,000
End year 4 cash payment. $40,000
Evaluates how the Time Value of Money concept results in a discounted cash flow in year 4 (an amount less than $30,000.
Correctly sums the discounted stream of cash flows.
Assesses the investment option using a 12% cost of capital discount rate by applying the NVP model. Include values in the assessment.
Correctly calculate the NVP at 12% cost of capital discount rate. Include alums in assessment.
Assesses the investment option when 7 % ost of capital discount rate, versus a 12% cost of capital discount rate is applied. Includes values in his assessment. Provides the NVP at 7% ost of capital rate.
Correctly calculates the NVP at a 12% cost of capital discount rate. Include values in assessment.