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The Hopkins Company has estimated that a proposed project's 10-year annual net cash benefit, received each year end. will be $2,500 with an additional terminal benefit of $5,000 at the end of the 10th year. Assuming that these cash inflows satisfy exactly Hopkins' required rate of return of 8%, calculate the initial cash outlay
Suggested Answer: B
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If the 8% return exactly equals the present value of the future flows ., NPV is zero), then simply determine the present value of the future inflows. Thus, Hopkins Company's initial cash outlay is $19,090 [($2,500)(PVIFA at 8% for 10 periods) + ($5J00)(PVlF at 8% for 10 periods ($2,500)(6.710) + ($5,000)(.463)].
26 comments · newest first
FE
Fernanda
10 months ago
I agree, seems like a solid estimate!
NI
Nicholle
11 months ago
Wait, how can the outlay be that high?
EL
Ellen
11 months ago
Definitely going with option B!
TA
Tashia
11 months ago
I think the initial cash outlay is around $19,090.
DA
Dalene
11 months ago
The annual cash benefit is $2,500.
MI
Micheline
12 months ago
I think the answer is around $19,090, but I’m not entirely confident. I need to double-check my calculations for the terminal benefit.
SE
Sena
12 months ago
I feel like I might be overthinking this. Is the initial cash outlay just the sum of the present values of the cash benefits?
NA
Nada
12 months ago
This question seems similar to the practice problems we did on cash flows. I think we need to discount both the annual cash flows and the terminal value.
PE
Pearly
1 year ago
I remember we calculated present value in class, but I'm not sure how to factor in the terminal benefit correctly.
SA
Samuel
1 year ago
This is a straightforward present value calculation. I'll just need to plug the numbers into the formulas and do the math. I'm confident I can get the right answer.
TI
Tiera
1 year ago
Okay, I think I've got this. I'll use the present value of an annuity formula to find the present value of the $2,500 annual cash inflows, and then add the present value of the $5,000 terminal benefit. That should give me the initial cash outlay.
KR
Kristal
1 year ago
Hmm, I'm a bit confused on how to approach this. I know it has something to do with present value, but I'm not sure which formulas to use. I'll have to think this through carefully.
BA
Barney
1 year ago
This looks like a present value calculation problem. I'll need to use the annuity formula and the lump sum formula to find the initial cash outlay.
BE
Bev
1 year ago
Alright, let me think this through step-by-step. I need to find the present value of the annuity and the present value of the terminal benefit, then add them together. As long as I'm careful with the calculations, I should be able to get the correct initial cash outlay.
JO
Johnathon
1 year ago
Okay, I've got this. Adjudication, arbitration, and mediation are all forms of alternative dispute resolution, while litigation is the traditional court-based process. Based on the context, I think arbitration is the best choice for box 7.
MY
Myra
1 year ago
Hmm, I'm a little unsure about this one. I know MODE_PRIVATE has something to do with data privacy, but I'm not sure of the exact details. I'll need to review my notes on shared preferences before answering.
JO
Josphine
1 year ago
Okay, I think I've got it. I need to find the number of repeat orders placed online and divide it by the total number of sales. Let me double-check my work before submitting the answer.
WI
Willie
1 year ago
I'm a bit confused by the options here. Conversion, Calculation, Tracking, and Bounce - I'm not sure which one is the correct term. I'll have to re-read the question closely.
MI
Mila
1 year ago
I've got this! The diagram clearly shows a many-to-many relationship between the two entities, so the answer must be B. m:n.
DE
Dexter
1 year ago
Okay, let's see. With the requirements still in flux, I'll want to make the components as modular and extensible as possible. I'll choose weak coupling, strong cohesion, and open for extension.
JU
Juan
2 years ago
That's a good point, the terminal benefit should definitely be factored into the calculation.
NI
Nida
2 years ago
I think the initial cash outlay could be as high as $30,000 due to the terminal benefit at the end of the 10th year.
BE
Bernardo
2 years ago
Considering the required rate of return, maybe $19,090 could be a more reasonable estimate.
JA
Jaime
2 years ago
I'm not sure about the exact amount, but it seems like a significant investment.
JU
Juan
2 years ago
I disagree, I believe it might be closer to $30,000.
BE
Bernardo
2 years ago
I think the initial cash outlay could be around $25,000.