“Evans Company is considering rebuilding and selling used alternators for automobiles. The company estimates that the net cash flows (sales less cash operating expenses) arising from the rebuilding and sale of the used alternators would be as follows (numbers in parentheses indicate an outflow): Years 1-10 $100,000 Year 11 (30,000) Year 12 110,000 Evans Company would purchase production equipment costing $275,000 now to use in the rebuilding of the alternators. The equipment would have a 12-year life and a $25,000 salvage value. The company’s cost of capital is 10%. 104. The present value of the net cash flows (sales less cash operating expenses) arising from the rebuilding and sale ofthe alternators (rounded to the nearest dollar) is: a. $602,820. b. $625,980. c. $639,090. d. $660,090.”,”3Present Value of Net Cash Flows= PV of Annuity $100,000 for 10 years at 10%- PV of 30,000 for 10 years at 10% + PV of 110,000 for 12 years= 100,000 x 6.145 = $614,500- 30,000 x 0.350 = (10,500)+ 110,000 x .319 = 35,000Total $639
090″