Problemkern co is planning to invest in a two-year project, Ask an Expert

Accounting

Problem:

Kern Co. is planning to invest in a two-year project that is expected to yield cash flows from operations, net of income taxes, of $50,000 in the first year and $80,000 in the second year. Kern requires an internal rate of return of 15%. The present value of $1 for one period at 15% is 0.870 and for two periods at 15% is 0.756. The future value of $1 for one period at 15% is 1.150 and for two periods at 15% is 1.323.

Required:

The maximum that Kern should invest immediately is

A) $81,670
B) $103,980
C) $130,000
D) $163,340

Note: Please provide through step by step calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91164421

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