What is the net present value of a deal

Assignment Help Accounting Basics
Reference no: EM133174104

Question - You expect annual cash flows from a certain property as follows:

Year 1 $20,000

Year 2 $22,000

Year 3 $30,000

Year 4 $31,000

Year 5 $40,000

In addition, you expect that you can sell the property at the end of the 5th year for 12 times its expected cash flow that year. If the opportunity cost of capital is 8% per year, then what is the net present value (NPV) of a deal in which the investor has to pay $300,000 for the property (at the end of Year O, one year prior to the first cash flow)?

Reference no: EM133174104

Questions Cloud

Prepare journal entries on the books of the lessor : The tractor is estimated to have a useful life of 5 years with residual value of P100,000. Prepare journal entries on the books of the lessor
Evaluate the extent organisational culture : Evaluate the extent which organisational culture at different stages in the company's development on the one hand may have supported Lego's growth, but on the o
Which journal entries should Downs Inc make : The fair value of these bonds has fallen to $95,000 due to market downturn. Which journal entries should Downs Inc. make for these bonds at December 31, 2020
Calculate the program schedule performance index : Question 1: Analyze the program history and calculate the program schedule performance index (SPI) and the program cost performance index (CPI) at different maj
What is the net present value of a deal : If the opportunity cost of capital is 8% per year, then what is the net present value (NPV) of a deal in which the investor has to pay $300,000
What factors about your business will impact : You now must decide whether to look for new space to lease or a building to buy. What factors about your business will impact your lease versus own decision
What is its ending retained earnings balance : The following selected amounts are available for Metlock, Inc. Stock dividends declared 200. What is its ending Retained Earnings balance
Which project would you accept : Project B has an initial investment of $178,000 and cash inflows of $97,000, $58,000, $45,000, and $80,000. Which project would you accept
Straight-line demand curve : Consider two price points at (a) and (c) for this straight-line demand curve.

Reviews

Write a Review

Accounting Basics Questions & Answers

  What is the cash flow statement

Question - What is the cash flow statement and why is it an important consideration to both the management, investors and creditors

  Calculate the new break-even volume

The company shows the following information about capital, expected sales: A new machine is added $1,000,000 to the factory, calculate new break-even volume

  What entry is required to correct the errors

What entry is required to correct the errors? Record the entry that is required to correct the error in the above post-closing trial balance

  How much is the carrying amount of the patent on December

In 20x1, G Co. started to develop a patent. Total costs incurred during the year amounting to P400,000. How much is the carrying amount of patent on December

  Prepare journal entries to record the transactions

Prepare journal entries to record the transactions for January and post them to the ledger accounts

  What is the rate of return for this project

If we looked at everything on a yearly basis and the lifecycle of the mold is 9 years, what is the rate of return for this project

  Compute cash flow from operating activities

Recorded for Serenity Sounds show net income of $32,000, depreciation expense of $9,000: and cash dividends paid of $7,000.

  What is gain or loss to be recognized

The Company purchased an investment property on January 1, 2014 for a cost of P2,200,000. What is gain or loss to be recognized for 2016

  Compute the transfer price using full cost

Transfer Pricing Gold Hill Mining Company mines quartz rock at a site in the Boise Basin and then crushes the quartz rock to obtain the gold.

  Prepare journal entries to record external transactions.

ACCT 251 Spring 2017 - Practice Set Exam. Prepare journal entries to record external transactions. Post the closing entries to the general ledger T accounts

  What is the net income from discontinued operations

Bramble prepares financial statements in accordance with IFRS. What is the net income/loss from discontinued operations reported in 2020

  Compute dividends received deduction for crane corporation

Problem - Crane and Loon corporations, two unrelated calendar year C corporations, Compute dividends received deduction for Crane Corporation

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd