Jordan Company is considering investing in two new vans that are expected to generate combined cash inflows of $29,500 per year. The vans' combined purchase price is $90,500. The expected life and salvage value of each are six years and $20,200, respectively. Jordan has an average cost of capital of 14 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your Intermediate calculations and final answer to 2 decimal places) b. indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted. a. Net present value b. Will the return be above or below the cost of capital? Should the investment opportunity be accepted? Above Accepted

Jordan Company is considering investing in two new vans that are expected to generate combined cash inflows of $29,500 per year. The vans' combined purchase price is $90,500. The expected life and salvage value of each are six years and $20,200, respectively. Jordan has an average cost of capital of 14 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your Intermediate calculations and final answer to 2 decimal places) b. indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted. a. Net present value b. Will the return be above or below the cost of capital? Should the investment opportunity be accepted? Above Accepted

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

Problem 1P

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