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Exercise 10-5A (Algo) Determining net present value LO 10-2 Thornton Company Is considering...

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Accounting

Exercise 10-5A (Algo) Determining net present value LO 10-2
Thornton Company Is considering Investing in two new vans that are expected to generate combined cash Inflows of $30,000 per
year. The vans' combined purchase price is $97,500. The expected life and salvage value of each are elght years and $20,800,
respectlvely. Thornton has an average cost of capital of 12 percent. (PV of $1 and PVA of $1)
Note: Use approprlate factor(s) from the tables provided.
Requlred
a. Calculate the net present value of the Investment opportunity.
Note: Negative amount should be Indlcated by a minus sign. Round your Intermedlate 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 capltal and whether it
should be accepted.
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