You are planning to invest $12,000 in new equipment. The investment will generate cost savings of $8,000 a year for two years, after that the salvage value is zero. The cost of capital is 25% a year. Compute the net present value (NPV).

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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You are planning to invest $12,000 in new equipment. The investment will generate
cost savings of $8,000 a year for two years, after that the salvage value is zero. The
cost of capital is 25% a year.
Compute the net present value (NPV).
O $23,520
O $4,000
O $11,520
($480)
$28,000
Transcribed Image Text:You are planning to invest $12,000 in new equipment. The investment will generate cost savings of $8,000 a year for two years, after that the salvage value is zero. The cost of capital is 25% a year. Compute the net present value (NPV). O $23,520 O $4,000 O $11,520 ($480) $28,000
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