HVAC · Practice-Exam-2 · Problem 3PDFSolution in PDF ↓
HVAC · Practice-Exam-2 · Problem 3
Problem & Solution
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Problem: A company with a tax rate of 30% makes a $50,000 one-time purchase that drives 8,000 of annual revenue and carries 1,200 of annual maintenance costs.
Approach: So to find the present value, we've got to add up all these different cash flows, some of which are positive and some of which are negative.
Key step: The salvage value after 10 years is 5,000.
Watch out: And then the only thing that's not shown here are taxes.
Result: And that gives us a present value of negative, because this initial term is small enough that it drags the whole thing down to negative $12,174, which...
✅ Answer: A
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