Johnson Corp. has an 8% required rate of return. It's considering a project that would provide annual cost savings of $50,000 for 5 years. The most that Johnson would be willing to spend on this project is?

Present Value PV of an Annuity

Year of 1 at 8% of 1 at 8%

1 .926 .926

2 .857 1.783

3 .794 2.577

4 .735 3.312

5 .681 3.993

Solution

a. $125,910.

b. $165,600.

c. $199,650.

d. $34,050.

SolutionSupport: ($50,000) (3,993)$199,650

The question is regarding the solution support question. Where does the 3993 come from? Can someone explain to me how that number came to be