Your firm has the option of marking an investment in softwarre that will cost $400,000 today but will save the company money over several years. You estimate that the software will provide the savings shown in the following table over its 5 year life. Should the firm make this investment if it requires a minimmum return of 7% on all investments? Year Savings Estimate 1 $97,000 2 $135,800 3 $126,100 4 $67,900 5 $38,800 The present value of the stream of saving is ? Should the firm make the investment?
Your firm has the option of marking an investment in softwarre that will cost $400,000 today but will save the company money over several years. You estimate that the software will provide the savings shown in the following table over its 5 year life. Should the firm make this investment if it requires a minimmum return of 7% on all investments? Year Savings Estimate 1 $97,000 2 $135,800 3 $126,100 4 $67,900 5 $38,800 The present value of the stream of saving is ? Should the firm make the investment?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Your firm has the option of marking an investment in softwarre that will cost $400,000 today but will save the company money over several years. You estimate that the software will provide the savings shown in the following table over its 5 year life. Should the firm make this investment if it requires a minimmum return of 7% on all investments?
| Year | Savings Estimate |
| 1 | $97,000 |
| 2 | $135,800 |
| 3 | $126,100 |
| 4 | $67,900 |
| 5 | $38,800 |
The
Should the firm make the investment?
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