Vanduser Company Is Considering the Purchase of a Labor Saving

question 32

Multiple Choice

Vanduser Company is considering the purchase of a labor saving piece of equipment with the following information:
$\begin{array}{ll}\text { Purchase cost of equipment } & \$ 432,000 \\\text { Annual cost savings, excluding depreciation(end of year) } & \$ 80,000 \\\text { Terminal salvage value } & \$ 10,000 \\\text { Useful life of equipment } & 12 \text { years } \\\text { Required rate of return } & 10 \% \\\text { Taxrate } & 30 \% \\\text { Depreciation method for taxpurposes } & \text { Straight-line }\end{array}$
Present value of ordinary annuity of one
$\begin{array} { l } \text {at 10\% for 12 periods }&6.8137 \\ \text {Present value of one at 10\% for 12 periods }&0.3186\\\end{array}$

What is the net present value of the equipment?

• A) $(50,433)
• B) $23,155
• C) $24,638
• D) $124,458