Carousel Company is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $400,000. The annual cost savings if the new machine is acquired will be $100,000. The machine will have a 6-year life, at which time the terminal disposal value is expected to be $50,000. Carousel Company is assuming no tax consequences. If Carousel Company has a required rate of return of 8%, which of the following is closest to the present value of the project? a. $34,836 b. $5,264 c. $93,800 d. $300,000
Carousel Company is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $400,000. The annual cost savings if the new machine is acquired will be $100,000. The machine will have a 6-year life, at which time the terminal disposal value is expected to be $50,000. Carousel Company is assuming no tax consequences. If Carousel Company has a required rate of return of 8%, which of the following is closest to the present value of the project? a. $34,836 b. $5,264 c. $93,800 d. $300,000
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 10PA: The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000,...
Question
Carousel Company is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $400,000. The annual cost savings if the new machine is acquired will be $100,000. The machine will have a 6-year life, at which time the terminal disposal value is expected to be $50,000. Carousel Company is assuming no tax consequences. If Carousel Company has a required rate of return of 8%, which of the following is closest to the present value of the project?
a.
$34,836
b.
$5,264
c.
$93,800
d.
$300,000
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