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Find the present value ratio of the investment

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Question - Advanced Digital Design is analyzing a capital investment project for using new computing technology to reduce current operating costs. The new computing technology will have a five-year life with no salvage value at the end of five years. Advanced Digital Design's cost of capital is 12%. Relevant cash flows and present value factors for 5 years @ 12% are as follows:

Investment in computer technology = $500,000.

Annual net cash savings from new computer technology = $135,000.

Salvage value of new computer technology = $0.

Present value of $1 = 0.5674

Present value of an annuity of $1 = 3.6048

Required - Find the present value ratio of the investment in new computing technology?

Reference no: EM132612636

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