Exercise 16-5 Determining net present value LO 16-2 Callaghan Company is considering investing in two new vans that are expected to generate combined cash inflows of $33,000 per year. The vans combined purchase price is $94,500. The expected life and salvage value of each are four years and $22,000, 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 presenr value

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

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