In an effort to reduce costs, Pontic Manufacturing Corporation is considering an investment in equipment that will reduce defects This equipment will cost $420,000, will have an estimated useful life of 10 years, and will have an estimated salvage value of $50,000 at the end of 10 years. The company's discount rate is 22%. what amount of cost savings will this equipment have to generate per year in each of the 10 years in order for it to be an acceptable project? (Ignore income taxes.) Click here to view Exhibit 13B-1 and Exhibit 138-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice a. $50,690 or more b. 105,315 or more c. $94,316 or more d. $41,315 or more

b. 105,315 or more

Explanation:

We have to discount the present value ofthe salvage value

and then solve for the PTM at 22% which is the firm cost of capital

Maturity  $50,000.0000

time  10.00

rate  0.22000

PV   6,844.9723

420,000 - 6,844.9723 = $413,155.0277

PV$413,155.0277

time10

rate0.22

C  $ 105,311.143

Cost saving in the order of 105,311 dolalr per year will fullfil the company required return on investment.

the definition of a small business is an independently owned and operated company that is limited in size and in revenue depending on the industry. a local bakery that employs 10 people is an example of a small business. a manufacturing facility that employees less than 500 people is an example of a small business.