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    linalopez04's Avatar
    linalopez04 Posts: 1, Reputation: 1
    New Member

    Apr 8, 2007, 04:18 PM
    Capital Budgeting and opportunity cost of capital
    Wiley Co. is considering an investment of $200,000 in a project with a 5 year economic life. After tax net income from the project has been calculated at $22,00 per year including a deduction for depreciation of $30,000 per year. The residual or salvage value at the end of 5 years is $50,000. Wiley Co.'s required rate of return is 10%.

    1.The present value of the annual cash inflows for the project is?

    2.The present value of the residual value is?
    goldenbutterfly's Avatar
    goldenbutterfly Posts: 63, Reputation: 8
    Junior Member

    Apr 8, 2007, 09:06 PM
    my take on the questions are:

    PV of an ordinary annuity of 52000 (22,000+30000) for 5 years is 197,120.91 (assuming that what you meant was 22,000 on 22,00)

    PV of salvage value 31,046

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