Concord is contemplating a capital project costing $32838. The project will provide annual cost savings of $12600 for 3 years and have a salvage value of $2000. The company’s required rate of return is 10%. The company uses straight-line depreciation.YearPresent Valueof 1 at 10%PV of an Annuityof 1 at 10%10.909 0.909 20.826 1.736 30.751 2.487 This project isacceptable because it has a positive NPV.unacceptable because it has a negative NPV.acceptable because it has a zero NPV.unacceptable because it earns a rate less than 10%.

Net present value is the difference between the present value of the initial cash outflow and the…

Answered: Concord is contemplating a capital…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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Concord is contemplating a capital project costing $32838. The project will provide annual cost savings of $12600 for 3 years and have a salvage value of $2000. The company’s required rate of return is 10%. The company uses straight-line depreciation.

Year	Present Value of 1 at 10%	PV of an Annuity of 1 at 10%
1	0.909	0.909
2	0.826	1.736
3	0.751	2.487

This project is

acceptable because it has a positive NPV.

unacceptable because it has a negative NPV.

acceptable because it has a zero NPV.

unacceptable because it earns a rate less than 10%.

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