Ask Question
BusinessBusiness
4 August, 07:48

Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. Financial data about the two choices follows. B14 Model F54 Model Investment $ 330 comma 000 $ 230 comma 000 Useful life (years) 10 10 Estimated annual net cash inflows for useful life $ 80 comma 000 $ 33 comma 000 Residual value $ 10 comma 000 $ 18 comma 000 Depreciation method Straightminusline Straightminusline Required rate of return 12 % 8 % What is the net present value of the B14 Model?

+4
Answers (1)
  1. 4 August, 08:16
    0
    NPV = $125,237.6

    Explanation:

    Net Present Value (NPV) : This is one of the techniques available to evaluate the feasibility of an investment project. The NPV of a project is the difference between the present value of the cash inflows and the cash outflows of the project.

    Net Present Value of Model B14

    Present Value (PV) of annual cash inflow = A * (1 - (1+r) ^ (-n)) / r

    A - annual cash inflow - 80,000, r-12%, n - 10

    PV of cash inflow = 80,000 * ((1 - (1.012) ^ (-10)) / 0.12 = 452,017.84

    PV of Scrap value = F * (1+r) ^ (-n)

    = 10,000 * (1.12) ^ (-10)

    = 3,219.73

    NPV = 452,017.84 + 3,219.73 - 330,000 = 125,237.57

    NPV = $125,237.6
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Which of the following situations would be most likely to lead to an increase in interest rates in the economy? a. Households start saving a larger percentage of their income. b. The Federal Reserve decides to try to stimulate the economy. c.
Answers (1)
What are the four different types of trade barriers
Answers (1)
One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 102.5 percent of par. Today, you sold this bond for 104 percent of par. What is your total dollar return on this investment?
Answers (1)
I put 100,000.00 towards purchasing a house with daughter and son in law they had to get a loan for balance due should i be responsible to pay for closing cost on the house also
Answers (1)
What are examples of business, management, and administration careers?
Answers (1)
New Questions in Business
What is the difference between a layoff and being fired?
Answers (1)
What is "risk" and how can people reduce it through "risk shifting"?
Answers (1)
Which type of business is best for Juanita to start? A corporation, because she needs a large investment to get started a sole proprietorship, because she will work alone from home a franchise, because many others will want to start the same
Answers (2)
The essential requirement for different businesses to be related is that A. E) the production methods that they employ both entail economies of scale. B. B) the products of the different businesses are bought by much the same types of buyers. C.
Answers (1)
Which of the following statement best describes the difference between a trade surplus and a trade deficit?. A. A trade surplus is when a country exports more than it imports, while a trade deficit happens when imports exceed exports. B.
Answers (1)
Home » Business » Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model.
Sign Up Forgot Password?