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:

Reasonable Travel

Travel that is affordable and planned with budget constraints in mind, focusing on value for money.

TAM, SAM, SOM

Total Addressable Market (TAM) is the overall revenue opportunity available or market demand for a product or service; Serviceable Available Market (SAM) is the segment of TAM targeted and served by a company's products or services; Serviceable Obtainable Market (SOM) is the portion of SAM that a company can realistically capture.

Potential Investors

Individuals or entities that may be interested in investing resources, typically money, into a business or project with the expectation of future financial return.

Market Future

The projected development and trends within a specific market or industry in the forthcoming period.