Exercise 24-7 (Algo) Net present value and unequal cash flows LO P3

Gomez is considering a $190,000 investment with the following net cash flows. Gomez 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
Net cash flows	$62,000	$50,000	$92,000	$165,000	$51,000

(a) Compute the net present value of this investment. (b) Should Gomez accept the investment?

Year	Net Cash Flows	Present Value of 1 at 12%	Present Value of Net Cash Flows
Year 1	$62,000
Year 2	50,000		39,860
Year 3	92,000
Year 4	165,000
Year 5	51,000
Totals	$420,000
Initial investment			190,000
Net present value