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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

A net present value analysis used to evaluate a proposed equipment acquisition indicated a $7,900 net present value. What is tile meaning of the $7,900 as it relates to the desirability of the proposal?

To determine

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is determined by the business, based on the net income from the investment, and it is also called as the discounted cash flow method.

To indicate: The meaning of the $7,900 net present value as it relates to the desirability of the proposal.

Explanation

Net present value method is used to choose the proposal by comparing the initial cash outflow of investment with the present value of its cash inflows...

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