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A $400,000 capital investment proposal has an estimated life of four years and no residual value. The estimated net cash flows are as follows:

Year Net Cash Flow

1.................................$200,000

2...................................150,000

3....................................90,000

4....................................80,000

The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and 0.636, respectively.

Determine the net present value.

Year Net Cash Flow

1.................................$200,000

2...................................150,000

3....................................90,000

4....................................80,000

The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and 0.636, respectively.

Determine the net present value.

What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Compound Interest

Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan. Thought to have originated in 17th century Italy, compound...

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