Required: ; . Calculate the net present value of the investment.

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
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Cowboy Recording Studio is considering an
investment of $134,700 in new recording
equipment. It is estimated that the new
equipment will generate an additional cash flow
of $19,500 per year for each year of its 7-year
life and will have a salvage value of $13,000 at
the end of its life. Cowboys' financial managers
estimate that the firm's cost of capital is 8%.
Required:
; . Calculate the net present value of the
investment.
Transcribed Image Text:Cowboy Recording Studio is considering an investment of $134,700 in new recording equipment. It is estimated that the new equipment will generate an additional cash flow of $19,500 per year for each year of its 7-year life and will have a salvage value of $13,000 at the end of its life. Cowboys' financial managers estimate that the firm's cost of capital is 8%. Required: ; . Calculate the net present value of the investment.
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