The management of Osborn Corporation is investigating an investment in equipment that would have a useful life of 5 years. The company uses a discount rate of 12% in its capital budgeting. The net present value of the investment, exclud ing the annual cash inflow, is −$408,614. How large would the annual cash inflow have to be to make the investment in the equipment financially attractive? (Ignore income taxes

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section10.A: Mutually Exclusive Investments Having Unequal Lives
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For the following item, refer to Exhibit 12B-1 and Exhibit 12B-2 to determine the appropriate discount factor(s) using the tables provided.





The management of Osborn Corporation is investigating an investment in equipment that would have a useful life of 5 years. The company uses a discount rate of 12% in its capital budgeting. The net present value of the investment, exclud ing the annual cash inflow, is −$408,614. How large would the annual cash inflow have to be to make the investment in the equipment financially attractive? (Ignore income taxes.)

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