Question
Al Inc. plans to automate its production process. The new equipment will cost $460,000 and will provide net cash inflows in the form of annual
Al Inc. plans to automate its production process. The new equipment will cost $460,000 and will provide net cash inflows in the form of annual cost savings of $110,000 each year for 6 years. At the end of year 6, Al will spend $50,000 to refurbish the equipment so that it can be used for one more year. The equipment will provide cost savings of $65,000 in year 7 and will have a salvage value of $30,000 at the end of year 7. Al uses a discount rate of 10% to make capital budgeting decisions. What is the net present value of this project?
O $39,585
0 $24,195
O $67,785
O $125,685
None of the above
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started