Lopez CoIs Interested in Purchasing Equipment That Would Improve Its Operational

Lopez Co.is interested in purchasing equipment that would improve its operational efficiency.The cost of the equipment is $400,000 with an estimated residual value of $30,000 and a useful life of ten years.The equipment is expected to generate cash inflows of $60,000 a year.The company's minimum rate of return is 8 percent.The present value of $1 for ten years at 8 percent is 0.463,and the present value of an annuity of $1 at 8 percent and ten years is 6.710.
-Using the above information for Lopez,the net present value of the project is

A) $402,600.
B) $13,890.
C) $200,000.
D) $16,490.

Correct Answer:

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