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Callaghan Company is considering investing in two new vans thatare expected to generate combined cash inflows of $28,000 per year.The vans’ combined purchase price is $95,000. The expected life andsalvage value of each are six years and $21,400, respectively.Callaghan has an average cost of capital of 12 percent. (PV of $1and PVA of $1) (Use appropriate factor(s) from the tablesprovided.)

Required: a. Calculate the net present value of the investmentopportunity. (Negative amount should be indicated by a minus sign.Round intermediate calculations and final answer to 2 decimalplaces.)

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Jamar Ferry
Jamar FerryLv2
28 Sep 2019

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Callaghan Company is considering investing in two new vans thatare expected to generate combined cash inflows of $27,500 per year.The vans’ combined purchase price is $99,000. The expected life andsalvage value of each are seven years and $20,000, respectively.Callaghan has an average cost of capital of 12 percent. (PV of $1and PVA of $1) (Use appropriate factor(s) from the tablesprovided.)


Required
a.

Calculate the net present value of the investment opportunity.(Negative amount should be indicated by a minus sign. Roundintermediate calculations and final answer to 2 decimalplaces.)

Net present value


b-1.

Indicate whether the investment opportunity is expected to earna return that is above or below the cost of capital.
Above
Below


b-2. Based on youranswer in Requirement b-1, should the investment opportunity beaccepted.
Rejected
Accepted

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