Haworth Company Is Considering the Purchase of a Labor Saving

question 77

Multiple Choice

Haworth Company is considering the purchase of a labor saving piece of equipment with the following information:
$\begin{array}{ll}\text { Purchase cost of equipment } & \$ 432,000 \\\text { Annual cost savings, excluding depreciation (end of year) } & \$ 90,000 \\\text { Terminal salvage value } & 0 \\\text { Useful life of equipment } & 12 \text { years } \\\text { Required rate of return } & 10 \% \\\text { Taxrate } & 30 \% \\\text { Depreciation method for taxpurposes } & \text { Straight-line }\end{array}$
Present value of ordinary annuity of one
$\begin{array} { l } \text {at \( 10 \% \) for 12 period }&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) $(2,737)
• B) $(174,442)
• C) $70,851
• D) $168,968

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