A company is considering a $166,000 investment in machinery with the following net cash flows. The company requires a 10% 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 1Year 2Year 3Year 4Year 5Net Cash Flow$10,000$28,000$55,000$42,000$111,000 (a) Compute the net present value of this investment.(b) Should the machinery be purchased? YearYear 1Year 2Year 3Year 4Year 5TotalsInitial investmentNet present valueNet CashFlowsPresent ValueFactorPresent Value ofNet Cash Flows

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Answered: (a) Compute the net present value of…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 10MCQ

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A company is considering a $166,000 investment in machinery with the following net cash flows. The company requires a 10% 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 Flow	$10,000	$28,000	$55,000	$42,000	$111,000

(a) Compute the net present value of this investment.
(b) Should the machinery be purchased?

Year
Year 1
Year 2
Year 3
Year 4
Year 5
Totals
Initial investment
Net present value
Net Cash
Flows
Present Value
Factor
Present Value of
Net Cash Flows

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