Question:
Pole Co. is investing in a machine with a three-year life. The machine is expected to reduce annual cash operating costs by $30,000 in each of the first two years and by $20,000 in year three. Present values of an annuity of $1 at 14% are
|
Period 1
|
0.88
|
|
2
|
1.65
|
|
3
|
2.32
|
Using a 14% cost of capital, what is the present value of these future savings?
1. $59,600
2. $60,800
3. $62,900
4. $69,500