Valesano Company Is Considering a Project with the Following Information

question 94

Multiple Choice

Valesano Company is considering a project with the following information:
$\begin{array}{ll}&\text { Project } 1\\\text { Cost } & \$ 4,000 \\\text { Annual cash operating savings(end of year) } & \$ 2,000 \\\text { Terminal salvage } & \$ 0 \\\text { Useful life in years } & 3 \\\text { Required rate of return } & 10 \% \\\text { Present value of one for } 3 \text { periods at } 10 \% & 0.7513\end{array}$
Present value of ordinary annuity of one for
$\begin{array} { l } \text {3 periods at 10\% }&2.4869 \\\end{array}$

Ignoring taxes,what is the lowest level of annual cash operating savings that will result in a positive net present value?

• A) $1,550
• B) $1,600
• C) $1,608
• D) $2,000

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