Woods Company is considering the purchase of some equipment.The initial investment will be $100,000.The estimated useful life of the equipment will be 5 years,at which point it will have a zero terminal salvage value.The annual savings in cash operating costs at the end of each year,for five years,is $29,000.The company has a minimum desired rate of return of 12%.The company uses straight-line depreciation for financial reporting.Ignore income taxes.The cash operating savings of $29,000 do not include depreciation expense.
Given:
The present value of ordinary annuity of one at 12% and 5 periods is 3.6048.
The present value of one at 12% and 5 periods is 0.5674.
Required:
Compute:

Question

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The Answer of Woods Company is considering the purchase of some equipment.The initial investment will be $100,000.The estimated useful life of the equipment will be 5 years,at which point it will have a zero terminal salvage value.The annual savings in cash operating costs at the end of each year,for five years,is $29,000.The company has a minimum desired rate of return of 12%.The company uses straight-line depreciation for financial reporting.Ignore income taxes.The cash operating savings of $29,000 do not include depreciation expense.
Given:
The present value of ordinary annuity of one at 12% and 5 periods is 3.6048.
The present value of one at 12% and 5 periods is 0.5674.
Required:
Compute:

Woods Company Is Considering the Purchase of Some Equipment