Question

Asked Apr 14, 2019

3 views

Hello,

Cowboy recording studio is considering the investment of $142,700 in a new recording equipment. It is estimated that the new equipment will generate additional cash flow of $21,000 per year for each year of its 7-year life and will have a salvage value of $13,500 at the end of its life. Cowboy's financial managers estimate that the firm's cost of capital is 8%. (Use the appropriate factor(s) from the tables provided (present value and annuity tables were given). Round the PV factors to 4 decimal places).

**Question a. ** Calculate the net present value of the investment. Negative numbers need a minus sign, do not round intermediate calculations.

**Net present value: ???**

**Question b**. Calculate the present value ratio of the investment. Round your answer to 2 decimal places.

**Present value ratio: ???**

thanks...

1 Rating

Step 1

**Step 1:**

Calculation of the present value factor of annuity:

**Note:** while calculating the present value factor and the present value factor of annuity the term “r” and “n” denotes:

- r = Cost of the capital (8%)
- n= Life of an asset (7 year life)

Step 2

**Step 2:**

Calculation of the present value factor:

**Note:** while calculating the present value factor and the present value factor of annuity the term “r” and “n” denotes:

- r = Cost of the capital (8%)
- n= Life of an asset (7 year life)

Step 3

**Step 3:**

Calculation of the present valu...

Tagged in

Find answers to questions asked by student like you

Show more Q&A

Q: Manahan Corporation received its August 31 bank statement showing total funds on deposit of $288,090...

A: a) Manahan's bank reconciliation statement as of August 31, 20X5 is as follows:

Q: The market price for a product has been $50 per unit, but competitive pressures have reduced the mar...

A: Manufacturing costs: Manufacturing costs are the costs which are involved in converting the raw mate...

Q: otals of various columns from the work sheet are shown below. What is the net income or loss? ...

A: Click to see the answer

Q: What is the difference between the accounting for a small stock dividend and the accounting for a la...

A: Stock Dividends:Stock dividend represents the declaration and distribution of dividend to its shareh...

Q: Hi, Need help with equation - Also see attached Profit=(P x Q - V x Q) - Fixed expenses Thanks, L...

A: Cost Volume-Profit (CVP) is a management accounting tool that expresses relationship among total sal...

Q: abardeen corporation borrowed 58,000 from the bank on october 1, year 1. The note had a 4 percent a...

A: Note payable: Note payable refers to the liability of the business, as business borrow money against...

Q: High Country, Inc., produces and sells many recreational products. The company has just opened a new...

A: 1 (a) Compute the unit product cost using absorption costing:

Q: Hello, Romano corp has 3 operating divisions and requires a 13% rate of return on all investments. ...

A: Calculate operating assets:Operating assets = (operating income – Residual income) × (100 / 13)Opera...

Q: Brief Exercise 15-8Marin Inc. has outstanding 10,400 shares of $10 par value common stock. On July 1...

A: Preparation of the journal entries to record the repurchased the outstanding shares as on July 1, 20...