(Ignore income taxes in this problem.) Trybus Corporation uses a discount rate o

Question

(Ignore income taxes in this problem.) Trybus Corporation uses a discount rate of 16% in its capital budgeting. Partial analysis of an investment in automated equipment with a useful life of 5 years has thus far yielded a net present value of -$233,764. This analysis did not include any estimates of the intangible benefits of automating this process nor did it include any estimate of the salvage value of the equipment. Ignoring any salvage value, to the nearest whole dollar how large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive? A) $71,400 B) $37,402 C) $233,764 D) $46,753

Explanation / Answer

Option A is correct as discount it at the rate of 16% will result it in annual cash inflow of 2,33,784 which will make the returns from the investment 0.

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