The following data pertain to an investment: $\begin{array} { l r }
\text { Cost of the Investment } & \$ 18,955 \
\text { Life of the Project } & 5 \text { years } \
\text { Annual Cost Savings } & \$ 5,000 \
\text { Estimated Salvage Value } & \$ 1,000 \
\text { Discount Rate } & 10 \%
\end{array}$ What is the net present value of the proposed investment? (Ignore income taxes in this problem.)

Question

The following data pertain to an investment: $\begin{array} { l r } 
\text { Cost of the Investment } & \$ 18,955 \
\text { Life of the Project } & 5 \text { years } \
\text { Annual Cost Savings } & \$ 5,000 \
\text { Estimated Salvage Value } & \$ 1,000 \
\text { Discount Rate } & 10 \%
\end{array}$ What is the net present value of the proposed investment? (Ignore income taxes in this problem.)

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the annual cost savings and the salvage value to their present values and subtracting the initial investment. The NPV is $621.

The Following Data Pertain to an Investment What Is the Net Present Value of the Proposed Investment