A manager is considering the following investment:

Initial capital investment | $180,000 |

Estimated useful life | 3 years |

Estimated disposal value in 3 years | 0 |

Estimated annual savings in cash operating costs | $80,000 |

Minimum desired rate of return | 10% |

Present value of an ordinary annuity, 3 periods at 10% | 2.4869 |

Present value of one, 3 periods at 10% | 0.7513 |

Assume straight-line depreciation is used. Ignore income taxes. The net present value of the investment is:

A) $18,952

B) $60,000

C) $198,952

D) $(123,652)

Family Fun Park is evaluating the purchase of a new game to be located on its Midway. Family Fun has narrowed its choices down to two; the Wacky Water Race game and the Whack-A-Mole game. Financial data about the two choices follow:

Wacky Water Race | Whack-A-Mole | |
---|---|---|

Investment | $32,000 | $22,000 |

Useful Life | 5 | 5 |

Estimated annual net cash inflows for 5 years | $8,000 | $6,000 |

Residual Value | $2,000 | $1,000 |

Depreciation method | Straight-line | Straight-line |

Required rate of return | 8% | 10% |

What is the total present value of future cash inflows and residual value from the Whack-A-Mole game?

A. $22,746

B. $23,367

C. $24,579

D. $45,367