b) Suppose you want to buy a custom-made program to manage your IS project from Supertuna co., and they ask that you make four payments of $2000 for four years, beginning next year, for a total of $8000. If they would agree to a single lump-sum payment at the time of sale, what amount do you think they would agree to? Let's suppose that the current bank interest is 7% return on investment. i) Calculate the present value (PV) of each $2000 payment in years 1, 2, 3, and 4. ii) Calculate the net present value (NPV) of the four $2000 payments.

b) Suppose you want to buy a custom-made program to manage your IS project from Supertuna co., and they ask that you make four payments of $2000 for four years, beginning next year, for a total of $8000. If they would agree to a single lump-sum payment at the time of sale, what amount do you think they would agree to? Let's suppose that the current bank interest is 7% return on investment. i) Calculate the present value (PV) of each $2000 payment in years 1, 2, 3, and 4. ii) Calculate the net present value (NPV) of the four $2000 payments.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EA: Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in...

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