Solution:
Let the cost of initial investment, IC = $310,000
Annual operating cost, OC = $33,000
Salvage value, SV = $50,500 after N = 5 years, i = 6% per year
Net present worth, NPW = = - IC - OC*(P/A,i,N) + SV*(P/F,i,N)
NPW = - 310000 - 33000*(P/A, 0.06, 5) + 50500*(P/F, 0.06, 5)
Now, (P/A, 0.06, 5) = ((1+0.06)5-1)/(0.06*(1+0.06)5) = 0.338/0.08 = 4.212
(P/F, 0.06, 5) = (1+0.06)-5 = 0.747
So, NPW = - 310000 - 33000*4.212 + 50500*0.747
NPW = - 310000 - 138995 + 37725 = -411270 (approximately)
Thus, correct option is (C) -$411,270.55
4) AmeriTextile Co. is considering opening a production and shipping with demand for its pillows. T facility in Dal...
AmeriTextile Co. is considering opening a production and shipping facility in Dallas to keep up with demand for its pillows. The facility will require an initial investment of $280,000, and an annual operating cost of $26,000. It will have a $74,500 salvage value after 9 years. Calculate the net present worth of this investment if the company's minimum attractive rate of return is 5% per year. (25 points) 1.
1. AmeriTextile Co. is considering opening a production and shipping facility in Dallas to keep up with demand for its pillows. The facility will require an initial investment of $280,000, and an annual operating cost of $26,000. It will have a $74,500 salvage value after 9 years. Calculate the net present worth of this investment if the company's minimum attractive rate of return is 5% per year. (25 points)
show the work please
AmeriTextile Co. is considering opening a production and shipping facility in Dallas to keep up with demand for its pillows. The facility will require an initial investment of $280,000, and an annual operating cost of $26,000. It will have a $74,500 salvage value after 9 years. Calculate the net present worth of this investment if the company's minimum attractive rate of return is 5 % per year. (25 points) 1.