Helicopter Gear is planning to expand its product line, which requires investment of $475,200 in special-purpose machinery.
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Question:
Revenue | $ | 528,000 | |
Expenses (including straight-line depreciation) | ( | 501,600 | ) |
Increase in net income | $ | 26,400 | |
All revenue from the new products and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes.
Compute the net present value of this proposed investment, using a discount rate of 12%. (An annuity table shows that the present value of $1 received annually for six years, discounted at 12%, is 4.111.)
Multiple Choice
$369,600
($41,078)
($105,600)
$434,121
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