Multiple Choice Question 57

Pina Colada Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(900). Annual cost savings were: $10000 for year 1; 8000 for year 2; and $6000 for year 3. The amount of the initial investment was

	Present Value	PV of an Annuity
Year	of 1 at 12%	of 1 at 12%
1	0.893	0.893
2	0.797	1.690
3	0.712	2.402