Question

Kerri Bates is reviewing his company’s investment in a cement plant. The company paid $15,000,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company’s discount rate for present value computations is 8 percent.
Expected and actual cash flows follow.


Required
Round your computations to the nearest whole dollar.
a. Compute the net present value of the expected cash flows as of the beginning of the investment.
b. Compute the net present value of the actual cash flows as of the beginning of the investment.
c. What do you conclude from thispostaudit?


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  • CreatedFebruary 07, 2014
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