Use the Information Below to Answer the Following Question(s)

question 41

Multiple Choice

Use the information below to answer the following question(s) .Wet Water Company drills residential and commercial wells.The company is in the process of analyzing the purchase of a new drill.Information on the proposal is provided below:
Note: Other than the initial investment, cash flows are end of period.The working capital is returned at the end of the investment period.
-Saturn Ltd.wants to automate one of its production processes.The new equipment will cost $180,000.In addition, Saturn will incur installation and testing costs of $5,000 and $8,500 respectively.The expected life of the equipment is 8 years and the salvage value of the equipment is estimated at $18,000.The annual cash savings are estimated at $32,000.The company's required rate of return is 14%.Ignore income taxes.What is the net present value of this investment?

• A)($25,246)
• B)$80,500
• C)($11,746)
• D)($45,056)
• E)($38,746)

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Definitions:

Processing Department

A division within a manufacturing facility where a specific type of production or activity takes place.

Equivalent Units

A concept used in process costing that converts partially completed units into a number of equivalent fully completed units.

Processing Department

A division or area in a manufacturing facility where a specific type of operation or process is carried out on a product as it moves towards completion.

Equivalent Units

A concept used in process costing that converts partially completed units into a smaller number of fully completed units.