Jonathon Company is considering an investment in the project below:
Project 1
Cost $10,000
Annual cash operating savings (end of year) $3,000
Terminal salvage $0
Useful life in years 5
Required rate of return 10%
Present value of one for 5 periods at 10% 0.6209
Present value of ordinary annuity of one for
5 periods at 10% 3.7908
Ignoring taxes, what is the lowest level of annual cash operating savings that will result in a positive net present value?
A) $2,420
B) $2,638
C) $3,000
D) $3,120
B
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