Zebron Company Is Considering the Following Investment Assume Straight-Line Depreciation Is Used

question 47

Multiple Choice

Zebron Company is considering the following investment:
$\begin{array}{ll}\text { Initial capital investment } & \$ 200,000 \\\text { Estimated useful life } & 3 \text { years } \\\text { Estimated disposal value in } 3 \text { years } & \$ 1,000 \\\text { Estimated annual savings in cash operating costs(end of year) } & \$ 100,000 \\\text { Minimum desired rate of return } & 10 \% \\\text { Present value of ordinary annuity of one, } 3 \text { periods at } 10 \% & 2.4869 \\\text { Present value of one, } 3 \text { periods at } 10 \% & 0.7513\end{array}$
Assume straight-line depreciation is used.Ignore income taxes.The net present value of the investment is ________.

• A) $48,690
• B) $49,441
• C) $49,690
• D) $101,000

---

Definitions:

Consolidated Net Income

The total net income attributed to the parent company and its subsidiaries, after eliminating intercompany transactions and non-controlling interests.

Fair Value Adjustment

An accounting process of updating the reported value of an asset or liability to reflect its current market value.

Consolidated Financial Statements

Financial reports that combine the financial results of a parent company and its subsidiaries into a single statement, showing the overall financial health of the group.

Inventory

Assets held for sale in the ordinary course of business, or materials and supplies that are used in the production process to manufacture goods.