The Sawyer Company Has $\$ 80,000$ To Invest and Is Considering Two Different Projects

The Sawyer Company has $\$ 80,000$ to invest and is considering two different projects: $\mathrm { X }$ and $\mathrm { Y }$ . The following data are available on the projects:
$\begin{array}{|l|r|r|}\hline & \text { Project X } & \text { Project Y } \\\hline \text { Cost of equipment needed now } & \$ 80,000 & --- \\\hline \text { Working capital requirement } & -- & \$ 80,000 \\\hline \text { Annual cash operating inflows } & \$ 23,000 & \$ 18,000 \\\hline \text { Salvage value in five years } & \$ 6,000 & -- \\\hline\end{array}$
Both projects will have a useful life of five years; at the end of five years, the working capital will be released for use elsewhere. Sawyer's discount rate is $12 \%$ . (Ignore income taxes in this problem.)
- What is the net present value of project X? (Do not round your intermediate calculations and round your final answer to the nearest whole number.)

A) ($11,708) .
B) $2,910.
C) $5,283.
D) $6,314.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free