(Net present value table required) Alexander Industries, in Chicago, plans to take advantage of the winds blowing in from Lake Michigan
Alexander is developing a project to install a wind turbine that would generate electricity and reduce energy costs. The turbine would have an initial cost of $500,000 and would provide a net cost savings of $57,000 per year. The turbine will have a life of 25 years.
If Alexander assigns a discount rate of 10% to this project, what is the net present value (NPV) of the wind turbine?
A) $17,389
B) $(494,756 )
C) $517,389
D) $5,244
A
Explanation: A)
PV of an ordinary annuity of 10% over 25 years = 9.077
57,000 × 9.077 = 517,389 - 500,000 = 17,389
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