Exercise 24-2 Net present value LO P3

Beyer Company is considering the purchase of an asset for $190,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 12% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

	Year 1				Year 2				Year 3				Year 4				Year 5				Total
Net cash flows		$	80,000			$	59,000			$	97,000			$	165,000			$	41,000			$	442,000

a. Compute the net present value of this investment. b. Should Beyer accept the investment?

2 Exercise 24-2 Net present value LO P3 12.5 points Beyer Company is considering the purchase of an asset for $190,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 12% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 $80,000 Year 2 $59,000 Net cash flows Year 3 $97,000 Year 4 $165,000 Year 5 $41,000 Total $442,000 eBook a. Compute the net present value of this investment. b. Should Beyer accept the investment? Hint Complete this question by entering your answers in the tabs below. Print Required A Required B References Compute the net present value of this investment. (Round your answers to the nearest whole dollar.) Year Net Cash Flows 1 $ 2 Present Present Value Value of 1 of Net Cash at 12% Flows 0.8929 $ 71.432 0.7972 47,035 0.7118 69,045 0.6855 133, 108 0.5674 23,263 $ 343,883 80,000 59,000 97,000 165,000 41,000 3 4 442,000 5 Totals $ Amount invested Net present value $ 343,883