Following is information on an investment considered by Hudson Co. The investmen

Question

Following is information on an investment considered by Hudson Co. The investment has zero salvage value. The company requires a 12% return from ts investments. Initial investment Expected net cash flows in year (excluding Investment A1 ($200 000) salvage value) 100,000 90,000 75,000 Compute this investment's net present value. (FV of $1. PV of $1. FVA of $1 and PVA of $1) (Use appropriate factorfs) from the tables provided. Round all present value factors to 4 decimat places.) & Answer is complete but not entirely correct Net Cash Value of 1 Present Value of Flows at 12% Year 1 Year 2 Year 3 Totals Amount invested Net present value $100,0000.8929 89280 105230 77,584 63 272,094 200,000 72,094 zsers 0,0000,7972 5,0000 7118 $265,000

Explanation / Answer

Answer:-

Hudson Co. Calculation of Investment's Net Present Value Net Cash Flows $ (a) Present Value of 1 at 12% (b) Present Value of cash flows (c=a*b) $ Year 1 100000 0.8929 89290 Year 2 90000 0.7972 71748 Year 3 75000 0.7118 53385 Totals 265000 214423 Amount Invested $ 200000 Net Present Value $ 14423

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