Written assignment unit 6 University Of the People BUS 3304 - Managerial Accounting Instructor: Habakkuk - Nkonge Barine Date: 10/03/2024.
When having a business it is very important to understand and to know which is the best investment, which is the worst investment, and which investment is possible. To make the best decision possible to get the best outcome of the investment, it is very essential to learn how to calculate the investment type. During this discussion assignment, I will provide a net present value analysis. First, during this discussion assignment, I will calculate the net cash inflow and outflow. Secondly, I will find the net present value using the format of Figure 8.2 in the textbook. Lastly, I will explain if the company…show more content… Year: 1 Purchase price: $0 Maintenance cost: $14.000 Labor savings: $30.000 Salvage value: $0 Total cash in (out): $16.000 (This is because you deduct 30.000 from 14.000).
Year: 2 Purchase price: $0 Maintenance cost: $14.000 Labor savings: $30.000 Salvage value: $0 Total cash in (out): $16.000 (This is because you deduct 30.000 from 14.000).
Year: 3 Purchase price: $0 Maintenance cost: $14.000 Labor savings: $30.000 Salvage value: $0 Total cash in (out): $16.000 (This is because you deduct 30.000 from 14.000).
Year: 4 Purchase price: $0 Maintenance cost: $14.000 Labor savings: $30.000 Salvage value: $10.000 Total cash in (out): $66.000 (This is because you deduct 30.000 from 14.000 and then you add 10.000). Provide the net present value of the investment based on figure 8.2. Today: 0 Purchase price: $50.000 Maintenance cost: $0 Labor savings: $0 Salvage value: $0 Total cash in (out): $50.000 PV factor 11 % = 1 The present net value of the investment:…show more content… PV factor 11 % = 0.7311 or about 0.7312 (This is something you can get by doing the following: 1/(1.11)/(1.11)/(1.11). The present net value of the investment: $11.699.
Year: 4 Purchase price: $0 Maintenance cost: $14.000 Labor savings: $30.000 Salvage value: $10.000 Total cash in (out): $26.000 (This is because you deduct 30.000 from 14.000 and then you add 10.000). PV factor 11 % = 0.6588 (This is something you can get by doing the following: 1/(1.11)/(1.11)/(1.11)/(1.11) The present net value of the investment: $17.128 TOTAL: In total, you will get the sum of $6.226. You can get this answer by adding up each present net value of investment every year and then deducting it two times from the price of the blueprint machine.
In your opinion, should the company proceed with the purchase of the machine? Yes, I believe that the company should proceed with the purchase, and here is why. According to Heisinger & Hoyle (2012), the NPV rules clearly state that if the NPV is equal to or higher than the amount of 0, the investment can be accepted. However, according to Heisinger & Hoyle (2012), if the NPV is lower than 0, then you can dismiss the investment in
