Question

Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment $400,000 $600,000 Annual net income 30,000 46,000 Net annual cash inflow 110,000 146,000 Estimated useful life 5 years 6 years Salvage value -0- -0- The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 "The net present value for Project Nuts" is Group of answer choices

Answer 1

Answer:

NPV = $35,868.06

Explanation:

Net present value is the present value of after tax cash flows from an investment less the amount invested.  

NPV for Project Nuts

NPV can be calculated using a financial calculator  

Cash flow in year 0 = $-600,000

Cash flow each year from year 1 to 6 = 146,000

I = 10%

NPV = $35,868.06

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute