Enable Company is considering the purchase of production
equipment that costs $1100000.
The equipment is expected to generate an annual cash flow of
$400000 and have a useful life of 5 years with no salvage
value.
The firm's cost of capital is 13 percent. The straight-line method
with no mid-year convention is used.
40 Ignoring income taxes, the net present value of the project is
A ($255,700)
B $308,000
C $255,700
D $900,000
Year | Cash flow | Discount rate @13% | |
0 | $ (11,00,000.00) | 1.000 | $ (11,00,000.00) |
(1-5) | $ 4,00,000.00 | 3.52 | $ 14,08,000.00 |
Net Present value | $ 3,08,000.00 | ||
Option (B) is correct $308000 |
Enable Company is considering the purchase of production equipment that costs $1100000. The equipment is expected...
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