Question: Net Present Value, Basic Concepts For discount factors use Exhibit 128.1. Wise Company is considering an investment that requires an outlay of $600,000 and

Net Present Value, Basic Concepts For discount factors use Exhibit 128.1. Wise

Net Present Value, Basic Concepts For discount factors use Exhibit 128.1. Wise Company is considering an investment that requires an outlay of $600,000 and promises an after-tax cash inflow of $765,000 one year from now. The company's cost of capital is14%. Required: 1. Break the $765,000 future cash inflow into three components: (a) the return of the original investment, (b) the cost of capital, and (c) the profit earned on the investment. Now compute the present value of the profit earned on the investment. If required, round your answers to the nearest dollar. (a) Return of the original investment 600,000 84,000 V (c) Profit earned on the investment 81,000 (b) Cost of capital Present value of profit 3,000 X 2. Conceptual Connection: Compute the NPV of the investment. Round your intermediate calculations and final answer to the nearest dollar. for Reuse Files Reuse Files

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!