The following data pertain to an investment proposal: Cost of the investment $ 20 , 000 Annual cost savings $ 5 , 000 Estimated salvage value $ 1 , 000 Life of the project 8 years Discount rate 16 % \begin{array} { | l | l | } \hline ext { Cost of the investment } & \$ 20,000 \\hline ext { Annual cost savings } & \$ 5,000 \\hline ext { Estimated salvage value } & \$ 1,000 \\hline ext { Life of the project } & 8 ext { years } \\hline ext { Discount rate } & 16 \% \\hline\end{array} Cost of the investment Annual cost savings Estimated salvage value Life of the project Discount rate $20 , 000 $5 , 000 $1 , 000 8 years 16% The net present value of the proposed investment is:A) $2,025.B) $6,064.C) $2,154.D) $1,720.

Question

The following data pertain to an investment proposal:    Cost of the investment  $ 20 , 000  Annual cost savings  $ 5 , 000  Estimated salvage value  $ 1 , 000  Life of the project  8  years   Discount rate  16 % \begin{array} { | l | l | } \hline 	ext { Cost of the investment }  &  \$ 20,000 \\hline 	ext { Annual cost savings }  &  \$ 5,000 \\hline 	ext { Estimated salvage value }  &  \$ 1,000 \\hline 	ext { Life of the project }  &  8 	ext { years } \\hline 	ext { Discount rate }  &  16 \% \\hline\end{array}  Cost of the investment   Annual cost savings   Estimated salvage value   Life of the project   Discount rate  ​ $20 , 000 $5 , 000 $1 , 000 8  years  16% ​ ​   The net present value of the proposed investment is:A) $2,025.B) $6,064.C) $2,154.D) $1,720.

habesha theory · Accepted Answer

Final Answer : A, Explanation :  The correct answer is A because the net present value of the proposed investment is $2,025.

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