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Below Are Two Potential Investment Alternatives Assume Straight-Line Depreciation in All Computations, and Ignore Income Taxes

Question 106

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Below are two potential investment alternatives: ST Initial capital investment $180,000$270,000 Estimated useful life 3yrs3yrs.  Estimated terminal salvage value −0−−0 -  Estimated annual savings in cash  operating costs $75,000$150,000 Minimum desired rate of return 10%12%\begin{array}{lrr}&S&T\\\text { Initial capital investment } & \$ 180,000 & \$ 270,000 \\\text { Estimated useful life } & 3 \mathrm{yrs} & 3 \mathrm{yrs} \text {. } \\\text { Estimated terminal salvage value } & -0- & -0 \text { - } \\\text { Estimated annual savings in cash } & & \\\quad \text { operating costs } & \$ 75,000 & \$ 150,000 \\\text { Minimum desired rate of return } & 10 \% & 12 \%\end{array} Assume straight-line depreciation in all computations, and ignore income taxes. The net-present value in investment Y is _____.


A) $120,000
B) $90,270
C) $492)
D) $184,584

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