The following information is available concerning a potential investment project

Question

The following information is available concerning a potential investment project: Annual cost savings Salvage value in 12 years . ..$4,000 9% Life of project 12 years The net present value of this investment was calculated to be $6,274 Calculate the amount of the annual cost savings associated with this investment. Do not use decimals in your answer. You will need to use the time value of money table factors posted in canvas to answer this question. To access these factors, click modules and then scroll to week 7. Click on the link labeled present & future value table factors. No credit will be awarded for this question using a means other than these table factors to answer this question.

Explanation / Answer

Net Present Value = Present Value of Cash Inflow - Present value of Cash Outflow.

Let us assume that Annual cost saving if

$6,274 = (7.1605x + $4,000*.3555) - $167,000

7.1605x = $167,000 + $6,274 - $ 1,422

7.1605x = $ 171,852

x = 24,000

Therfore Annual Saving cost = $ 24,000

x = $ 24,000/-

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