At Westonci.ca, we provide clear, reliable answers to all your questions. Join our vibrant community and get the solutions you need. Experience the ease of finding reliable answers to your questions from a vast community of knowledgeable experts. Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform.
Sagot :
Answer:
41.28 million
Explanation:
the net present value of the two alternatives needs to be determined. The appropriate alternative would be the plane with the higher NPV
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Alternative 1
Cash flow in year 0 = $-100 million
Cash flow each year from year 1 to 5 = $28 million
I = 9%
NPV = $8.91 million
Alternative 2
Cash flow in year 0 = $-132 million
Cash flow each year from year 1 to 10 = $27 million
I = 9%
NPV = $41.28 million
The second alternative has the higher NPV and it would increase the value of the company by $41.28 million if accepted
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Thanks for stopping by. We are committed to providing the best answers for all your questions. See you again soon. Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.