70.2K

Verified Solution

Link Copied!

intial investment of $1,500,000

salvage value of $50,000

cash inflow for 4 years @ $500,000 every year

100% - Normal text, Arial - 10 - BI U A E the following setup to calculate the payback period for a project with unequal cash flows: Year Annual Net Cash Flow Cumulative Net Cash Flows 2 500,000 5,000,000 5,000,000 550,000 500,000 1,000,000 1,500,000 2,050,000 4 Payback period is at year 3 4. Calculate the NPV of polo shirts. NPV= Total cash inflows-Initial investment NPV= (500,000 x 4) - 1,500,000 = 500,000 a) Notice that for all four years the company will receive the same cash flow provided by the product Use the PV of an annuity discount factor for this part of the calculation b) Notice also that the company will sell equipment in the year for an additional cash flow. Which present value table should you use when calculating a single sum? Add this amount to the PV found in part a) to determine the PV of total net cash flows. 100% - Normal text, Arial - 10 - BI U A E the following setup to calculate the payback period for a project with unequal cash flows: Year Annual Net Cash Flow Cumulative Net Cash Flows 2 500,000 5,000,000 5,000,000 550,000 500,000 1,000,000 1,500,000 2,050,000 4 Payback period is at year 3 4. Calculate the NPV of polo shirts. NPV= Total cash inflows-Initial investment NPV= (500,000 x 4) - 1,500,000 = 500,000 a) Notice that for all four years the company will receive the same cash flow provided by the product Use the PV of an annuity discount factor for this part of the calculation b) Notice also that the company will sell equipment in the year for an additional cash flow. Which present value table should you use when calculating a single sum? Add this amount to the PV found in part a) to determine the PV of total net cash flows

Answer & Explanation Solved by verified expert

See Answer