(Net present value table required) Simon Manufacturing is conducting preliminary research into installing a geothermal heat pump to heat and cool its factories and offices
The initial cost of installing the new system is $245,000; however, Simon will save $35,000 annually on its heating and cooling costs. The system has an expected life of 15 years.
What is the net present value (NPV) of the project, assuming a discount rate of 8%?
A) $54,565
B) $(233,975 )
C) $299, 565
D) $11,025
A
Explanation: A)
PV of an ordinary annuity of 8% over 15 years = 8.559
35,000 × 8.559 = 299,565 - 245,000 = 54,565
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