The Following Data Pertain to an Investment $$\begin{array} { | l | l |} \hline \text { Discourt Rate } & 10 \%\\\hline\end{array}$$

question 121

Multiple Choice

The following data pertain to an investment:
$\begin{array}{|l|r|}\hline \text { Cost of the Investment } & \$ 18,995 \\\hline \text { Life of the Project } & 5 \text { years } \\\hline \text { Annual Cost Savings } & \$ 5,000 \\\hline \text { Estimated Salvage Value } & \$ 1,000 \\\hline\end{array}$
$$\begin{array} { | l | l |} \hline \text { Discourt Rate } & 10 \%\\\hline\end{array}$$
What is the net present value of the proposed investment? (Ignore income taxes in this problem.) (Do not round your intermediate calculations and round the final answer to the nearest whole dollar.)

• A) ($3,430).
• B) $0.
• C) $620.
• D) $3,355.

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Definitions:

Residual Income

The income that remains after all personal debts and expenses have been paid, or in business, the net income after deducting cost of capital from operating profit.

Investment Center

A business segment within a company for which the manager has control and responsibility over cost, revenue, and investments.

Target Income

The specific amount of net income that a company aims to achieve for a certain period.

Investment Turnover

Investment turnover measures how efficiently a company generates sales from its investment in fixed assets.