Acc202-Ernest Jones is reviewing his company’s investments in a cement plant. The company paid…

Acc202-Ernest Jones is reviewing his company’s investments in a cement plant. The company paid…

Ernest Jones
is reviewing his company’s investments in a cement plant. The company paid $15,000,000 five years ago to acquire the plant. Now top management is
considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The
company’s discounts rate for present value computations is 8 percent. Expected and actual cash flow as follows:

	Year 1	Year 2
Expected	3,30,000	4,920,000
Actual	2,700,000	3,060,000

Required:

A. Compute the net present value of the expected cash flows as of the beginning of the investment

B. Compute the net present value of the actual cash flows as of the beginning of the investment

C. What do you conclude from this post audit.

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