FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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 (Ignore income taxes in this problem.) Your Company’s cost of capital is 3%, It is contemplating the purchase of equipment to replace equipment that it is currently leasing. The useful life of the equipment is seven years.  What is the net present value of purchasing the equipment?
 

Cost of equipment $650,000
Current lease payments $95,000
Working capital needed $80,000
Repair end of year 2 $12,000
Repair end of year 4 $17,000
Salvage value $125,000

Group of answer choices

$1,828

$2,103

$3,947

($62,937)

$2,942

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