34. Determining net present value

Callaghan Company is considering investing in two new vans that are expected to generate combined cash inflows of $28,500 per year. The vans combined purchase price is $95,500. The expected life and salvage value of each are five years and $21,900, respectively. Callaghan has an average cost of capital of 14 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required

a.

Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to 2 decimal places.)

Net present value ( )

b-1.	Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital.
	( ) Above or ( ) Below

b-2.	Based on your answer in Requirement b-1, should the investment opportunity be accepted. ( ) Accepted of ( ) Rejected