Reference no: EM132527187

Randel Company is evaluating a capital expenditure proposal that has the following predicted cash flows:

Initial investment                                    $45,110

Operation

Year 1                 20,640

Year 2                30,000

Year 3                10,000

Salvage value              0

The present value factors of $1 for different rates of return are as follows:

Present Value of $1

Period              12%            14%            16%                   18%

1                0.89286           0.87719       0.86207               0.84746

2                    0.79719        0.76947          0.74316          0.71818

3                     0.71178            0.67497         0.64066        0.60863

4                     0.63552            0.59208         0.55229          0.51579

Question 1: Given a discount rate of 14 percent, determine the net present value of the investment proposal.

Option 1: $45,110

Option 2: $5,618

Option 3: $40,000

Option 4: $2,829