Present value of the investment opportunity

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Reference no: EM13126758

Determining net present value. Lake Shuttle Inc. is considering investing in two new vans that are expected to generate combined cash inflows of $20,000 per year. The van's combined purchase price is $65,000. The expected life and salvage value each are four years and $15,000 respectively. Lake Shuttle has an average cost of capital of 14%.

A. Calculate the net present value of the investment opportunity.

B. Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.

Reference no: EM13126758

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