Exercise 15-24

Insert your answers in the gray-shaded cells or select from the drop-down list.

If an answer is incorrect, the word “wrong” will appear.

a.

Point in Time

Description

Cash Flows

x

PV Factor

=

Present Value

0

Initial outlay

$    (5,00,000)

     1.0000

1-8

Fixed costs per year

$       (20,000)

     5.5348

1-8

Contr. margin per year

$      1,00,000

     5.5348

NPV

b.

Based on NPV, this is an

unacceptable

investment.

c.

In addition to the NPV, what other factors should Birmingham's managers consider when making the investment decision?

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