Kingbird is contemplating a capital project costing $31500. The project will provide annual cost savings of $15800 for 3 years and have a salvage value of $4000. The company's required rate of return is 10%. The company uses straight-line depreciation.

Present Value PV of an Annuity

Year of 1 at 10% of 1 at 10%

1 .909 .909

2 .826 1.736

3 .751 2.487

This project is

acceptable because it has a positive NPV.

acceptable because it has zero NPV.

unacceptable because it has a negative NPV.

unacceptable because it earns a rate less than 10%.

Multiple Choice Question 146

A project that cost $66000 has a useful life of 5 years and a salvage value of $3000. The internal rate of return is 12% and the annual rate of return is 18%. The amount of the annual net income is

$3780.

$6210.

$5670.

$4140.