Solve the net present value of investment opportunity

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Adams Company is considering investing in two new vans that are expected to generate combined cash inflows of $35,000 per year. The vans' combined purchase price is $92,500. The expected life and salvage value of each are eight years and $21,700, respectively. Adams has an average cost of capital of 10 percent. (PV of $1 and PVA of $1)

Question a. Calculate the net present value of the investment opportunity

Question 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: EM132521348

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