Multiple Choice
Levine Company will purchase a van for $40,000.It will have a depreciable life of 5 years and a terminal salvage value of $10,000.Assume a tax rate of 30% and a required rate of return of 12%.The company uses the straight-line method of depreciation for tax purposes.The annual cash operating savings at the end of each year,exclusive of depreciation,are $10,000 for five years.The present value of an ordinary annuity factor of one for 5 periods at 12% is 3.6048.The present value of one for 5 periods at 12% is 0.5674.What is the net present value of the van?
A) $(441)
B) $(2,604)
C) $1,722
D) $5,420
Correct Answer:
Verified
Correct Answer:
Verified
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