s Question 6 pts 6 of 11 0 complete This Quiz 59 pts possibl

s Question: 6 pts 6 of 11 (0 complete) This Quiz: 59 pts possibl our firm has the o on of makrg an nvestment in new software that vill cost S180 287 today and ?? estimated to provide the savings shown nheolo mng table over Syeak Should the firm make this nvestment requires a minimum annual return of 7% on all investments? The present value of the stream of savings estimates is (Round to the nearest dollar) Should the firm make this investment if it requires a minimum annual retum of 7% on al investments? (Select the best answer below) O Yes O No Data Table (Click on the icon located on the top-night corner of the data table below in order to copy its contents into a spreadsheet) s estimate $65,800 $61,100 $32.900 Print Done

Solution

Statement showing calculation of NPV Particulars Year PVf 7% Amount (in $) Present Value (in $) Cash Outflows                -   1.00 1,80,287 1,80287 PV of Cash outflows = PVCO 1,80,287 Cash inflows (Savings) 1      0.9346 47,000 43,926.20 Cash inflows (Savings) 2      0.8734 65,800 57,469.72 Cash inflows (Savings) 3      0.8163 61,100 49,875.93 Cash inflows (Savings) 4      0.7629 32,900 25,099.41 Cash inflows (Savings) 5      0.7130 18,800 13,404.40 PV of Cash Inflows (Savings)/ PVCI 1,89,775.66 NPV= PVCI - PVCO 9,488.66 Advise: The firm should make the investment in new software as it leads to positive NPV amounting to US $ 9,488.66