Question

Use the following information for questions 18-23: 18: The Fox Company is trying to decide whether to invest in automated production equipment as they are currently operating via manual labor. The following relates to the proposed investment to automate: $500,000 initial cost of the equipment, life of the project 5 years, estimated salvage value at the end of 5 years is $60,000, annual cash revenues $170,000 (received each year), annual cash expenses $40,000 (paid each year). At the end of year three, the company will have to pay $50,000 for an engine replacement. The discount rate is 10%. What is the present value of the initial $500,000 investment in the equipment? $500,000 ($500,000) ($400,000) $250,000

          Use the following information for questions 18-23:

18: The Fox Company is trying to decide whether to invest in automated production equipment as they are currently operating via manual labor. The following relates to the proposed investment to automate: $500,000 initial cost of the equipment, life of the project 5 years, estimated salvage value at the end of 5 years is $60,000, annual cash revenues $170,000 (received each year), annual cash expenses $40,000 (paid each year). At the end of year three, the company will have to pay $50,000 for an engine replacement. The discount rate is 10%.

What is the present value of the initial $500,000 investment in the equipment?
$500,000
($500,000)
($400,000)
$250,000

Added by Daniel K.

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