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Pam's Pet Palace is considering an investment in dog grooming equipment that would increase cash receipts by $12,000 annually. The initial cost of the equipment is $50,000. The equipment has an estimated 10 year life and will have a $5,000 salvage value. Using a discount rate of 8%, and the tables in the appendix, what is the net present value of this equipment? a) $35,520 b) $30,520 c) $82,835 d) $32,835.

Respuesta :

jepessoa

Answer:

The answer is: D) $32,835

Explanation:

The easiest way to calculate the present value of an investment is to use an excel spreadsheet and the present value function =NPV(discount rate, series of cash flow). The first nine cash flows equal 12,000 and the tenth cash flow equals 17,000.

After you calculate the present value in excel, you must subtract the investment amount to determine the net present value.

NPV = $82,837 - $50,000 = $32,837 (the answer varies by $2 probably because of rounding percentages)

The net present value is the amount that is derived from the difference between the present value of cash inflow and the present value of cash outflow.

The net present value of this equipment is: D) $32,835  

The easy way to calculate the present value of an investment is to use an excel spreadsheet and the present value function =NPV(discount rate, series of cash flow).

The first nine cash flow is equal 12,000 and the tenth cash flow is equal 17,000.

Refer to the images for the computation.

To know more about the computation of the NPV, refer to the link below:

https://brainly.com/question/23226616?referrer=searchResults

Ver imagen swatiupadhyay714
Ver imagen swatiupadhyay714
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