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Compute the net present value of each investment

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Question - Whitney Company is contemplating three different equipment investments. The relevant data follows:

                                                             Proposal D    Proposal O         Proposal G

Cost                                                       $200,000      $300,000          $830,000

Annual cash savings (end of year)             $40,000        $70,000            $150,000

Terminal salvage value                             $10,000        $5,000              $20,000

Estimated useful life in years                       10                 10                       10

Minimum desired rate of return                    12%              12%                    12%

Method of depreciation                           Straight-line    Straight-line       Straight-line

Required:

A) Compute the net present value of each investment. Ignore income taxes.

B) If only one investment can be acquired, which investment should be chosen?

Reference no: EM131945524

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