Question
Byron Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in
Byron Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $406,000 and have a 5 year life. The salvage value of the equipment is estimated to be $75,000. If the hurdle rate is 12%, what is the approximate net present value? Ignore income taxes. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Round your final answer to the nearest dollar amount.)
Negative $2,965
Zero
Positive $75,000
Positive $406,000
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