Whitney Company is contemplating three different equipment investments. The relevant data follows:

Proposal D Proposal O Proposal G

Cost- 200,000 300,000 830,000

Annual cash savings (end of year-) 40,000 70,000 150,000

Terminal salvage value- 10,000 5,000 20,000

Estimated useful life in years- 10 10 10

Minimum desired rate of return- 12% 12% 12%

Method of depreciation- Straight Line Straight Line Straight Line The present value factor of an ordinary annuity of one for 10 periods at 12% is 5.6502. The present value factor of one for 10 periods at 12% is 0.322.

A) Compute the net present value of each investment. Ignore income taxes.

B) If only one investment can be acquired, which investment should be chosen?