Beta Company Is Considering an Investment in a New Storage

question 141

Multiple Choice

Beta Company is considering an investment in a new storage facility that would require an initial outlay of $250,000, and would yield yearly cash flows of $48,000 for 8 years. Beta uses a discount rate of 7% What is the NPV of the investment?
$\begin{array}{|r|l|l|l|l|l|l|}\hline\text {Present Value of }\\\text {an Annuity of }\\\$ 1\\ \hline &5\%&6\%&7\%&8\%&9\%&10\%\\\hline1 & 0.952 & 0.943 & 0.939 & 0.92 & 0.917 & 0.909 \\\hline 2& 1.859 & 1.833 & 1.809 & 1.78 & 1.759 & 1.736 \\\hline 3 & 2.723 & 2.673 & 2.624 & 2.577 & 2.531 & 2.487 \\\hline 4 & 3.546 & 3.465 & 3.387 & 3.31 & 3.240 & 3.170 \\\hline 5 & 4.329 & 4.212 & 4.10 & 3.99 & 3.890 & 3.791 \\\hline 6 & 5.076 & 4.917 & 4.767 & 4.623 & 4.486 & 4.355\\\hline 7& 5.780 & 5.582 & 5.389 & 5.206& 5.033 &4.355 \\\hline 8& 6.463 & 6.210 & 5.971 & 5.747 & 5.535 &5.335 \\\hline9& 7.108 & 6.802 & 6.513 & 6.247 & 5.995 &5.759 \\\hline 10&7.722 & 7.360 & 7.024 & 6.710 & 6.418 &6.145 \\\hline\end{array}$

• A) $36,608
• B) $24,177
• C) $13,184
• D) $44,000

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