A $350,000 Capital Investment Proposal Has an Estimated Life of Four

question 77

Essay

A $350,000 capital investment proposal has an estimated life of four years and no residual value.The estimated net cash flows are as follows: $$\begin{array} { c c c c } \text { Year } & \text { Net Cash Flow } & \text { Year } & \text { Net Cash Flow } \\1 & \$ 150,000 & 3 & \$ 104,000 \\2 & 130,000 & 4 & 90,000\end{array}$$ ​
The minimum desired rate of return for net present value analysis is 12%.The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively.Determine the net present value.

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Definitions:

Taking a Loss

A situation where the sale price of an asset is less than its purchase price, resulting in a financial loss for the seller.

Peak Efficiency

The optimal point of production or operation at which an entity is utilizing its resources most effectively, without waste.

Attract New Firms

Strategies or policies designed to encourage businesses to establish operations in a particular area.

Accounting Profits

The difference between a company's total revenue and its total expenses, excluding taxes and costs not directly related to its core business operations.