Below Are Two Potential Investment Alternatives Assume Straight-Line Depreciation in All Computations, and Ignore Income Taxes

question 106

Multiple Choice

Below are two potential investment alternatives: $\begin{array}{lrr}&S&T\\\text { Initial capital investment } & \$ 180,000 & \$ 270,000 \\\text { Estimated useful life } & 3 \mathrm{yrs} & 3 \mathrm{yrs} \text {. } \\\text { Estimated terminal salvage value } & -0- & -0 \text { - } \\\text { Estimated annual savings in cash } & & \\\quad \text { operating costs } & \$ 75,000 & \$ 150,000 \\\text { Minimum desired rate of return } & 10 \% & 12 \%\end{array}$ Assume straight-line depreciation in all computations, and ignore income taxes. The net-present value in investment Y is _____.

• A)$120,000
• B)$90,270
• C)$492)
• D)$184,584

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