Question: Lopez Co. is interested in purchasing equipment that would improve its operational efficiency. The cost of the equipment is $400,000 with an estimated residual value

Lopez Co. is interested in purchasing equipment that would improve its operational efficiency. The cost of the equipment is $400,000 with an estimated residual value of $30,000 and a useful life of ten years. The equipment is expected to generate cash inflows of $60,000 a year. The company's minimum rate of return is 8 percent. The present value of $1 for ten years at 8 percent is 0.463, and the present value of an annuity of $1 at 8 percent and ten years is 6.710. Using the above information for Lopez, the net present value of the project is
a. $402,600
b.$13,890
c. $200,000
d. $16,490

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