What Is the Net Present Value of a Capital Project

question 108

Multiple Choice

What is the net present value of a capital project to buy new equipment for replacing old equipment, given the following data and a minimum return of 12%? Ignore income taxes. Old New
Equipment Equipment
Purchase price $21,600 $36,000
Accumulated amortization 7,200 0
Remaining useful life (years) 8 8
Current salvage value 12,000 0
Salvage value in 8 years 1,000 2,000
Annual operating costs 14,000 8,000

• A)$6,616
• B)$(5,788)
• C)$4,596
• D)$7,020

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