Skysong is contemplating a capital project costing $34838. The project will provide annual cost savings of $12800 for 3 years and have a salvage value of $4000. The company's required rate of return is 10%. The company uses straight-line depreciation. Present Value PV of an Annuity Year of 1 at 10% of 1 at 10% 1 0.909 2 1.736 3 2.487 This project is 0.909 0.826 0.751 unacceptable because it has a negative NPV. acceptable because it has a zero NPV. acceptable because it has a positive NPV. unacceptable because it earns a rate less than 10%.

Skysong is contemplating a capital project costing $34838. The project will provide annual cost savings of $12800 for 3 years and have a salvage value of $4000. The company's required rate of return is 10%. The company uses straight-line depreciation. Present Value PV of an Annuity Year of 1 at 10% of 1 at 10% 1 0.909 2 1.736 3 2.487 This project is 0.909 0.826 0.751 unacceptable because it has a negative NPV. acceptable because it has a zero NPV. acceptable because it has a positive NPV. unacceptable because it earns a rate less than 10%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Skysong is contemplating a capital project costing $34838. The project will provide annual cost savings of
$12800 for 3 years and have a salvage value of $4000. The company's required rate of return is 10%. The
company uses straight-line depreciation.
Present Value PV of an Annuity
Year of 1 at 10% of 1 at 10%
1
2
3
This project is
0.909
0.826
0.751
0.909
1.736
2.487
unacceptable because it has a negative NPV.
acceptable because it has a zero NPV.
acceptable because it has a positive NPV.
unacceptable because it earns a rate less than 10%.

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