Norton Company Is Considering a Project That Will Require an Initial

question 83

Essay

Norton Company is considering a project that will require an initial investment of $750,000 and will return $200,000 each year for 5- years.
a) If taxes are ignored and the required rate of return is 9%, what is the project's net present value?
b) Based on this analysis, should Norton Company proceed with the project?
Below is a table for the present value of $1 at compound interest. $$\begin{array} { l l l l } \text { Year } & 9 \% & \text { Year } & 9 \% \\\hline 1 & 0.917 & 6 & 0.596 \\2 & 0.842 & 7 & 0.547 \\3 & 0.772 & 8 & 0.502 \\4 & 0.708 & 9 & 0.460 \\5 & 0.650 & 10 & 0.422\end{array}$$ Below is a table for the present value of an annuity of $1 at compound interest. $$\begin{array} { l l l l } \text { Year } & 9 \% & \text { Year } & 9 \% \\\hline 1 & 0.917 & 6 & 4.486 \\2 & 1.759 & 7 & 5.033 \\3 & 2.531 & 8 & 5.535 \\4 & 3.240 & 9 & 5.995 \\5 & 3.890 & 10 & 6.418\end{array}$$

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Definitions:

Procedural Justice

The fairness in the processes that resolve disputes and allocate resources.

Rules and Procedures

Established guidelines and systematic methods designed to organize and standardize actions within an organization or activity.

Personal in Nature

Refers to something that is intended for or affects an individual in a private, intimate, or personal capacity.

Assignment

The transfer of rights or property from one party to another.