Reference no: EM13794316
Fairbanks Company is considering the following investment:
Initial capital investment $255,000
Estimated useful life 3 years
Estimated disposal value in 3 years $2,500
Estimated annual savings in cash operating costs (end of year) $145,000
Minimum desired rate of return 10%
Present value of $1, period 1 at 10% 0.909
Present value of $1, period 2 at 10% 0.826
Present value of $1, period 3 at 10% 0.751
Assume straight-line depreciation is used. Ignore income taxes. The net present value of the investment is __________.
A. $105,470
B. $107,348
C. $107,970
D. $147,500
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