A piece of equipment has an estimated five-year life, an internal rate of return of 12 per cent and estimated annual savings of $15 000. What was the cost of the equipment?

A) $75 000
B) $26 435
C) $54 075
D) $60 000

Question

CAMILLE HADL RABY · Accepted Answer

Final Answer : C, Explanation :  Using the formula for present value of annuity, we can find the cost of the equipment:PV = Annual Savings * (1 - 1/(1+r)^n)/rwhere r is the internal rate of return and n is the number of years (5 in this case).Substituting the given values, we get:PV = 15000 * (1 - 1/(1+0.12)^5)/0.12PV = $54,075. Therefore, the cost of the equipment was $54,075.

A piece of equipment has an estimated five-year life, an internal rate of return of 12 per cent and estimated annual savings of $15 000. What was the cost of the equipment?

A) $75 000
B) $26 435
C) $54 075
D) $60 000

Definitions

Learning Objectives

Learning Objectives

Related questions

A piece of equipment has an estimated five-year life, an internal rate of return of 12 per cent and estimated annual savings of $15 000. What was the cost of the equipment?A) $75 000B) $26 435C) $54 075D) $60 000

Definitions

Learning Objectives

Learning Objectives

Related questions

A piece of equipment has an estimated five-year life, an internal rate of return of 12 per cent and estimated annual savings of $15 000. What was the cost of the equipment?

A) $75 000
B) $26 435
C) $54 075
D) $60 000