Compute the present value, Financial Accounting

Q. Compute the present value?

The offer for the manufacturing rights is for a ten-year period.

Annual after-tax cash flow after Year 4 = $660000

Present value of this cash flow over six years at 12% = 660000 × 4·111 = $2713260

Present value of post Year 4 cash flows = 2713260 × 0·636 = $1725633

746_Compute the present value.png

This net present value is equal to an annual benefit of 534383/ 5·650 = $94581

The after-tax value of the offer of $300,000 per year for 10 years = 300000 × 0·75 = $225000

In the lack of other information the offer should be accepted.

An alternative approach is to compute the present value of the offer

300000 × 0·75 × 5·650 = $1271250

Ever since this is greater than the NPV of investing by $736867 the offer should be accepted.

Posted Date: 7/11/2013 7:43:23 AM | Location : United States







Related Discussions:- Compute the present value, Assignment Help, Ask Question on Compute the present value, Get Answer, Expert's Help, Compute the present value Discussions

Write discussion on Compute the present value
Your posts are moderated
Related Questions
i need help with my project

The following information was taken from the ledger of Jefferson Industries, Inc.: Direct labor $85,000 Administrative expenses $59,0

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2013 ($ in 000s): sales revenue, $

Do you help with assignments?

a) DELL computers sell 100 PCs at Rs.42,000. The variable expenses amount to Rs.28,000 per PC. The total fixed expenses is Rs.14,00,000. Prepare an income statement.   b.) Ca

Q. Describe Passive Income? Passive Income - Includes income derived from such sources like dividends, royalties, interest, rents, amounts received from personal service contra

Alyssa's Custom Cakes currently sells 5 birthday, 2 wedding, and 3 specialty cakes each month for $50, $150, and $100 each, respectively.. The cost of labor is $50 per hour includi

A of surat consigns goods to B of jaipur to be sold at or above price .Be is entitles to get a ommission of 8% on sales at invoice price plus 25% of any surplus price realized. B

How should I handle Booking an invoice in one month for Raw material that has not been received until the following month?

On January 1, 2010, Anderson Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1 Issued