2. Using a 8% interest rate, determine which device, if any, should be selected based on net present worth. Initial Cost -S600 Annual Benefit Salvage Value $100 Useful Life 5 years 10 years Device A $250 Device B -S700 $100 $180

2. Using a 8% interest rate, determine which device, if any, should be selected based on net present worth. Initial Cost -S600 Annual Benefit Salvage Value $100 Useful Life 5 years 10 years Device A $250 Device B -S700 $100 $180

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 11EA: How much would you invest today in order to receive $30,000 in each of the following (for further...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

2. Using a 8% interest rate, determine which device, if any, should be selected
based on net present worth.
Initial Cost
-S600
Annual Benefit Salvage Value
$100
Useful Life
5 years
10 years
Device A
$250
Device B
-S700
$100
$180

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