Courses MBA6203:14281-Managerial Accounting and Budgeting, Fall 2017 Chapter 12
ID: 2586562 • Letter: C
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MBA6203:14281-Managerial Accounting and Budgeting, Fall 2017
Chapter 12
QUESTION 4
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Pipette Medical Services is considering an investment of $200,000. Data related to the investment and present value factors are as follows:
Year
Cash Inflows
Present Value of $1.00
1
$100,000
0.84746
2
92,000
0.71818
3
120,000
0.60863
4
160,000
0.51579
5
100,000
0.43711
The investment's net present value is:
Select one:
A. $114,237
B. $175,820
C. $150,092
D. $ 75,830
Year
Cash Inflows
Present Value of $1.00
1
$100,000
0.84746
2
92,000
0.71818
3
120,000
0.60863
4
160,000
0.51579
5
100,000
0.43711
Explanation / Answer
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=(100,000(0.84746)+(92000*0.71818)+(120000*0.60863)+(160,000*0.51579)+(100,000*0.43711)
=$350091.56
NPV=Present value of inflows-Present value of outlows
=$350091.56-$200,000
=$150092(Approx)(C)