Q. 1a. Present value at 12 percent?b. Present value at 15 percent?c. Present value at 21 percent? Fox Co. has identified an investment project with the following cash flows.YearCash Flow$1,3301,3001,6101,970124a. If the discount rate is 12 percent, what is the present value of these cash flows? (Donot round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)b. What is the present value at 15 percent? (Do not round intermediate calculations andround your answer to 2 decimal places, e.g., 32.16.)c. What is the present value at 21 percent? (Do not round intermediate calculations andround your answer to 2 decimal places, e.g., 32.16.)a. Present value at 12 percentb. Present value at 15 percentc. Present value at 21 percent

Present value can be defined as the current value of an amount of money or a series of cash inflows…

Answered: Fox Co. has identified an investment…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

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Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
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