The following data have been gathered for a capital investment decision. Annual net cash inflow: Year 1
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The following data have been gathered for a capital investment decision.
Annual net cash inflow:
Year 1 | $50,000 |
Year 2 | 60,000 |
Year 3 | 40,000 |
Year 4 | 50,000 |
Year 5 | 40,000 |
Total for all years $240,000
Minimum rate of return for this investment is 14 percent. Use the present value factors for 14 percent discount rate in Appendix of your textbook.
a) Compute the present value of the cash inflows of the investment.
b) What would have been the present value of the cash flows if they were received in equal amounts over
the five-year period at the same discount rate? (The total cash inflows remain same.)
c) If the answers to parts (a) and (b) differ, briefly explain the reason(s) why.
Expert Answer:
Related Book For 
Operations Management Creating Value Along the Supply Chain
ISBN: 978-0470525906
7th Edition
Authors: Roberta S. Russell, Bernard W. Taylor
Posted Date:
