You Are Considering Investing $600,000 in a New Automated Inventory

question 31

Multiple Choice

You are considering investing $600,000 in a new automated inventory system that will provide after-tax cost savings of $50,000 next year.These cost savings are expected to grow at the same rate as sales.If sales are expected to grow at 5% per year and your cost of capital is 10%,then what is the NPV of the automated inventory system?

• A)$400,000
• B)$500,000
• C)-$100,000
• D)$1,000,000

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Definitions:

Economy's Production

The total value of all goods and services produced within an economy over a specific time period.

Goods and Services

The physical items (goods) and activities (services) that satisfy human wants and needs and are offered in the marketplace for purchase.

GDP

Gross Domestic Product signifies the total monetary value of all goods and services produced within a country's boundaries over a predetermined time frame, reflecting the nation's economic health.

GDP Deflator

The GDP deflator is an economic metric that converts output measured at current prices into constant-dollar GDP.