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Assume straight-line depreciation is used

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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

Reference no: EM13794316

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