Refer to the data in PE 23-4. J.H. expects the new investment will generate revenues of $24,000
Question:
Refer to the data in PE 23-4. J.H. expects the new investment will generate revenues of $24,000 per year for the five years of the investment’s life. At the end of the four years, the company expects the investment to have a salvage value of $20,000. What is the present value of cash inflows related to this investment? Should J.H. make this investment?
Data from PE 23-4
J.H. Physical Therapy Equipment, Inc., is deciding whether to invest in a certain capital investment. Th e investment requires an initial outlay of $55,000 and annual payments of $12,000 made at the end of the year for five years. J.H.’s discount rate is 14%. What is the present value of cash outflows related to this investment?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Step by Step Answer:
Present Present Time Cash Value Value of Period Inflows Factor Cash Inflows Revenues Years 15 24000 ...View the full answer
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
