Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 25 Jul 2017 My Price 4.00

NPV and inflation.

NPV and inflation. Cost-Less Foods is considering replacing all of its old cash registers with new ones. The old registers are fully depreciated and have no disposal value. The new registers cost$600,000 (in total). Because the new registers are more efficient than the old registers, Cost-Less will have annual incremental cash savings from using the new registers in the amount of $140,000 per year. The registers have a six-year useful life, and are depreciated using the straight-line method with no disposal value. Cost-Less requires a 10% real rate of return. Ignore taxes.
1. Given the information above, what is the net present value of the project?
2. Assume the $140,000 cost savings is in current real dollars, and the inflation rate is 5.5%. Find the NPV of the project assuming inflation.
3. Should Cost-Less buy the new cash registers?

Answers

Maurice Tutor
(5)
Status NEW Posted 25 Jul 2017 12:07 AM My Price 4.00

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