The following data pertain to an investment: Cost of the investment $ 18 , 955 Life of the project 5 years Annual cost savings $ 5 , 000 Estimated salvage value $ 1 , 000 Discount rate 10 % \begin{array} { | l | l | } \hline ext { Cost of the investment } & \$ 18,955 \\hline ext { Life of the project } & 5 ext { years } \\hline ext { Annual cost savings } & \$ 5,000 \\hline ext { Estimated salvage value } & \$ 1,000 \\hline ext { Discount rate } & 10 \% \\hline\end{array} Cost of the investment Life of the project Annual cost savings Estimated salvage value Discount rate $18 , 955 5 years $5 , 000 $1 , 000 10% The net present value of the proposed investment is:A) $3,355.B) $621.C) ($3,430) .D) $0.

Question

The following data pertain to an investment:    Cost of the investment  $ 18 , 955  Life of the project  5  years   Annual cost savings  $ 5 , 000  Estimated salvage value  $ 1 , 000  Discount rate  10 % \begin{array} { | l | l | } \hline 	ext { Cost of the investment }  &  \$ 18,955 \\hline 	ext { Life of the project }  &  5 	ext { years } \\hline 	ext { Annual cost savings }  &  \$ 5,000 \\hline 	ext { Estimated salvage value }  &  \$ 1,000 \\hline 	ext { Discount rate }  &  10 \% \\hline\end{array}  Cost of the investment   Life of the project   Annual cost savings   Estimated salvage value   Discount rate  ​ $18 , 955 5  years  $5 , 000 $1 , 000 10% ​ ​   The net present value of the proposed investment is:A) $3,355.B) $621.C) ($3,430) .D) $0.

viktoriya belinskaya · Accepted Answer

Final Answer : B, Explanation :  The net present value (NPV) of the proposed investment is calculated by discounting the cash flows (both inflows and outflows) back to their present value using the given discount rate of 10%. The cash flows include the initial investment, annual cost savings, and the salvage value at the end of the project's life. The NPV calculation involves subtracting the initial investment from the sum of the present values of all future cash flows. The correct answer indicates that the NPV calculation was performed accurately, taking into account the specifics provided, such as the cost of the investment, life of the project, annual cost savings, estimated salvage value, and the discount rate.

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