Jonathon Company Is Considering an Investment in the Project Below

question 143

Multiple Choice

Jonathon Company is considering an investment in the project below:
$\begin{array}{ll}&\text { Project } 1\\\text { Cost } & \$ 10,000 \\\text { Annual cash operating savings (end of year) } & \$ 3,000 \\\text { Terminal salvage } & \$ 0 \\\text { Useful life in years } & 5 \\\text { Required rate of return } & 10 \% \\\text { Present value of one for } 5 \text { periods at } 10 \% & 0.6209\end{array}$
Present value of ordinary annuity of one for
$\begin{array} { l } \text {5 periods at 10\% }&3.7908 \\\end{array}$

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

• A) $2,420
• B) $2,638
• C) $3,000
• D) $3,120

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