The Millers runs a not-for-profit charity organization that is not subjected to income tax. They are...
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The Millers runs a not-for-profit charity organization that is not subjected to income tax. They are considering the capital investment proposal but has the following factors to consider: • Initial investment is $88,000 • An acceptable rate of return of 8% • Annual net cash flows of $19,000 for 6 years • • No salvage values A present value factor of X (the result of $1.00 received annually at the end of each year for six years at 8% interest compounded annually. Is the NPV method of this proposal positive or negative? Show your computation and explain how you arrive at your conclusion. 5 points The Millers runs a not-for-profit charity organization that is not subjected to income tax. They are considering the capital investment proposal but has the following factors to consider: • Initial investment is $88,000 • An acceptable rate of return of 8% • Annual net cash flows of $19,000 for 6 years • • No salvage values A present value factor of X (the result of $1.00 received annually at the end of each year for six years at 8% interest compounded annually. Is the NPV method of this proposal positive or negative? Show your computation and explain how you arrive at your conclusion. 5 points
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Answer rating: 100% (QA)
Calculation of net present value of proposal would be as follows NPV CF x Fx PVAIF1n Initial inv... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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