Acc 206 Week 5 Assignment Essay
Johanna Van Zuiden
1. Basic present value calculations
Calculate the present value of the following cash flows, rounding to the nearest dollar:
a. A single cash inflow of $12,000 in five years, discounted at a 12% rate of return. 1.762341683 $6,809.12
b. An annual receipt of $16,000 over the next 12 years, discounted at a 14% rate of return. 5.660292125 $90,564.67
c. A single receipt of $15,000 at the end of Year 1 followed by a single receipt of $10,000 at the end of Year 3. The company has a 10% rate of return. …show more content…
20x1 $(10,000.00) 1 $(10,000.00)
20x1 $1,300.00 0.862068966 $1,120.69
20x2 $1,300.00 0.743162901 $966.11
20x3 $14,550.00 0.640657674 $9,321.57 NPV $1,408.37
c. Given the results of part (b), should Greene have acquired the Heartland stock? Briefly explain.
My answer is Yes the Greene should have acquired the Heartland stock bacasue they had positive gain over the years.
3. Straightforward net present value and internal rate of return
The City of Bedford is studying a 600-acre site on Route 356 for a new landfill. The startup cost has been calculated as follows:
Purchase cost: $450 per acre $270,000.00
Site preparation: $175,000 $175,000.00
The site can be used for 20 years before it reaches capacity. Bedford, which shares a facility in Bath Township with other municipalities, estimates that the new location will save $40,000 in annual operating costs.
a. Should the landfill be acquired if Bedford desires an 8% return on its investment? Use the net-present-value method to determine your answer. rate 0.08 0.785451793 $40,000.00
PVIF 9.818147407 $392,725.90