Huggins Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 830 2 1,150 3 1,410 4 1,550 If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value $ What is the present value at 16 percent?

$4,013.10.

$3,329.54.

Explanation:

If discount rate is 8%

PV of Cash Flows :

($830 / 1.08^1) + ($1,150 / 1.08^2) + ($1,410 / 1.08^3) + ($1,550 / 1.08^4)

$768.52 + $985.94 + $1,119.30 + $1,139.30

$4,013.10

If discount rate is 16%

PV of Cash Flows :

($830 / 1.16^1) + ($1,150 / 1.16^2) + ($1,410 / 1.16^3) + ($1,550 / 1.16^4)

$715.52 + $854.64 + $903.33 + $856.05

$3,329.54.

$18,000

Explanation:

Required:

Find the amount of income Perimeter recognizes in 20X1 as a result of the investment.

Amount of income to be recognized should be calculated as:

Share of net income - Amortization of equipment in excess of book value

Where,

Share of net income = 30% of net income

= 30% × $80,000

= $24,000

Less: Amortization of equipment in excess of book value =

Therefore, amount of income to be recognized =

$24,000 - $6,000

= $18,000

Amount of income Perimeter recognizes in 20X1 as a result of this investment is $18,000