Core Inc. is reviewing an investment proposal. The schedule below provides the ...
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Accounting
| Core Inc. is reviewing an investment proposal. The schedule below provides the | |||||
| initial cost, and net cash flows each year. All cash flows are assumed to take place at | |||||
| the end of the year. There is no salvage value at the end of the investment's life. | |||||
| Year | Initial Investment | Annual Net Cash Flows | |||
| 0 | $199,900 | ||||
| 1 | . | $50,700 | |||
| 2 | 50,300 | ||||
| 3 | 50,200 | ||||
| 4 | 40,700 | ||||
| 5 | 40,600 | ||||
| Core Inc. uses a | 15 | % target rate of return for new investment proposals. | |||
| All calculations must be shown to achieve full marks. You can only achieve 1 mark if only a | |||||
| one line solution is given | |||||
| a) | What is the net present value of the investment? (12 marks) | ||||
| b) | Should the company accept the investment? Clearly state the reasons. (3 marks) | ||||
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