Question

Current Attempt in Progress Hsung Company accumulates the following data concerning a proposed capital investment: cash cost $187,990, net annual cash flows $39,500, and present value factor of cash inflows for 10 years is 5.02 (rounded). (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).) Determine the net present value, and indicate whether the investment should be made. Net present value $enter the net present value in dollars The investment select an option be made.

Answer 1

Answer:

$10,300

the investment should be made because the NPV is positive

Explanation:

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

NPV =  present value of the cash flows - Cost of the asset

present value of the cash flows = ($39,500 x 10) x (5.02/10) = 198290

NPV = 198290 - $187,990 = $10,300

The NPV is positive. this means that the investment is profitable. So, the investment should be made