Byron Corp

question 87

Multiple Choice

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 $400,000 and have a 5-year life.The salvage value of the equipment is estimated to be $75,000.If the hurdle rate is 15%,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. )

• A)Negative $27,490
• B)Zero
• C)Positive $400,000
• D)Positive $75,000

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Definitions:

Opportunity Costs

The cost of forgoing the next best alternative when making a decision.

Financial Statements

Reports that summarize the financial performance and position of a company, including the balance sheet, income statement, and cash flow statement.

Pecuniary

Relating to or consisting of money.