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Use the Information Below to Answer the Following Question(s)

Question 3

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Use the information below to answer the following question(s) .
Neptune Ltd. wants to expand its operations by manufacturing a new product line. New equipment will cost $225,000. Incremental sales are estimated at $150,000 per year for 6 years. Variable costs of producing the new product line are 52% of sales and incremental annual fixed costs are $25,000. The equipment can be salvaged after 6 years for 16% of its original cost. The company's required rate of return for new projects is 18%. Ignore income taxes.
-What is the net present value of the Neptune Ltd. investment?


A) ($26,291)
B) ($47,277)
C) $225,536
D) ($60,613)
E) $93,000

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