Homework answers / question archive / Net Present Value  Carsen Sorensen, controller of Thayn Company, just received the following data associated with production of a new product:  • Expected annual revenues: $700,000 • Projected product life cycle: five years • Equipment: $750,000 with a salvage value of $100,000 after five years • Expected increase in working capital: $100,000 (recoverable at the end of five years) • Annual cash operating expensel: estimated at $420,000 • Required rate of return: 8 percent  The present value tables provided in Exhibit 19B

Net Present Value  Carsen Sorensen, controller of Thayn Company, just received the following data associated with production of a new product:  • Expected annual revenues: $700,000 • Projected product life cycle: five years • Equipment: $750,000 with a salvage value of $100,000 after five years • Expected increase in working capital: $100,000 (recoverable at the end of five years) • Annual cash operating expensel: estimated at $420,000 • Required rate of return: 8 percent  The present value tables provided in Exhibit 19B

Accounting

Share With

Net Present Value 
Carsen Sorensen, controller of Thayn Company, just received the following data associated with production of a new product: 
• Expected annual revenues: $700,000 • Projected product life cycle: five years • Equipment: $750,000 with a salvage value of $100,000 after five years • Expected increase in working capital: $100,000 (recoverable at the end of five years) • Annual cash operating expensel: estimated at $420,000 • Required rate of return: 8 percent 

The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Estimate the annual cash flows for the new product. Enter cash outflows as negative amounts and cash inflows as positive amounts. 
Year 0 1-4 5 
Cash Flow 

2. Using the estimated annual cash flows, calculate the NPV.