Johnson Company is considering an investment opportunity with the following expected net cash inflows: Year 1,...

  

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Johnson Company is considering an investment opportunity with the following expected net cash inflows: Year 1, $260,000; Year 2, $185,000; Year 3, $120,000. The company uses a discount rate of 7% and the initial investment is $345,000. Calculate the NPV of the investment. Should the company invest in the project? Why or why not? Use the following table to calculate the net present value of the project. Years Year 1 Present value of each year's inflow: (n = 1) Year 2 Present value of each year's inflow: (n = 2) Year 3 Present value of each year's inflow: (n = 3) Total PV of cash inflows Year 0 Initial investment Net present value of the project Inflow Net Cash PV Factor (i = 7%) Present Value 260,000 185,000 120,000 Using the NPV as the basis of its decision, Johnson Company should consider the investment because its NPV is positive Johnson Company is considering an investment opportunity with the following expected net cash inflows: Year 1, $260,000; Year 2, $185,000; Year 3, $120,000. The company uses a discount rate of 7% and the initial investment is $345,000. Calculate the NPV of the investment. Should the company invest in the project? Why or why not? Use the following table to calculate the net present value of the project. Years Year 1 Present value of each year's inflow: (n = 1) Year 2 Present value of each year's inflow: (n = 2) Year 3 Present value of each year's inflow: (n = 3) Total PV of cash inflows Year 0 Initial investment Net present value of the project Inflow Net Cash PV Factor (i = 7%) Present Value 260,000 185,000 120,000 Using the NPV as the basis of its decision, Johnson Company should consider the investment because its NPV is positive

Answer rating: 100% (QA)

Answer To calculate the Net Present Value NPV of the investment opportunity we need to discount each ... View the full answer