Orbit Airlines is considering the purchase of a new $275,000 maintenance hangar. The new hangar has an estimated useful life of 5 years with an expected salvage value of $50,000. The new hangar is expected to generate cost savings of $90,000 per year in each of the 5 years. A $20,000 increase in working capital will also be needed for this new hangar. The working capital will be released at the end of the 5 years. Orbit's discount rate is 18%. What is the net present value of the new hangar? (Ignore income taxes.)Refer to Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.

A. $17,020
B. $8,280
C. $9,440
D. $28,280


Answer: A

Business

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