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Sagot :
Answer:
Ideal China
a) The present value of the cost of the kiln if the installation cost is treated as a separate current expense is:
= $318,304.
b) The present value of the cost of the kiln if the installation cost is treated as a part of the capital investment is:
= $363,776.
Explanation:
a) Data and Calculations:
Present value factor for 5 years at 5% = 0.784
Cost of new kiln = $464,000
Installation cost = $58,000
Present value of the cost of the kiln if the installation cost is treated as a separate current expense = $406,000 * 0.784 = $318,304
Present value of the cost of the kiln if the installation cost is treated as a part of the capital investment = $464,000 * 0.784 = $363,776
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