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

Below are two potential investment alternatives: $\begin{array}{lll}&A&B\\\text { Initial capital investment } & & \\\$ 180,000 & \$ 270,000 & \\\text { Estimated useful life } & 3 \text { yrs. } & 3 \text { yrs. } \\\text { Estimated terminal salvage value } & -0- & -0- \\\text { Estimated annual savings in cash } & & \\\text { op erating costs } & \$ 75,000 & \$ 120,00 \\\text { Minimum desired rate of return } & 10 \% & 12 \%\end{array}$
Assume straight- line depreciation in all computations, and ignore income taxes. The net present value in investment A is:

A) $75,000
B) $6,518
C) $(123,652)
D) $186,518

Correct Answer:

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