(Ignore income taxes in this problem.) Gull Inc. is considering the acquisition of equipment that costs $480,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are:
-If the discount rate is 10%,the net present value of the investment is closest to:

Question

(Ignore income taxes in this problem.) Gull Inc. is considering the acquisition of equipment that costs $480,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are: 
-If the discount rate is 10%,the net present value of the investment is closest to:

Quizplus · Accepted Answer

Without the details of the investment amount, it is difficult to provide an exact net present value. However, we can use the available options to estimate the net present value. If we assume the investment amount to be around $1,000,000 (as it seems reasonable for the given discount rate), then the closest net present value would be around $174,709 using the formula:
Net Present Value = Investment Amount / (1 + Discount Rate/100)^Number of Years
= $1,000,000 / (1 + 10/100)^1
= $1,000,000 / 1.1
= $909,090.91
Net Present Value = $909,090.91 - $1,000,000
= -$90,909.09
The option closest to this result is D, which is $174,709. Therefore, the best choice is D with the assumption that the investment amount is around $1,000,000.

(Ignore Income Taxes in This Problem