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question 5

Multiple Choice

[The following information applies to the questions displayed below.]
Newman Labs is considering buying equipment,which would enable the company to obtain a five-year research contract.The specialized equipment costs $650,000 and will have no salvage value when the five-year contract period is over.The estimated annual operating results of the project are as follows:
All revenue from the contract and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes.
-Compute the net present value of this investment,using a discount rate of 12%.(An annuity table shows that the present value of $1 received annually for five years,discounted at 12%,is 3.605. )

• A)$468,650
• B)$179,150
• C)$289,500
• D)$829,150

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