Calculate the net present value for both assets


Problem:

Please help with the following managerial accounting problem. Provide step by step calculations.

Your company plans to acquire one of two assets. asset a costs $162,500 and has expected annual cash savings of $37,500. asset b cost $225,000 and has expected annual cash savings of $77,500. You'll use the straight-line depreciation for both assets over their estimated useful lives of 5 years, after which both will have a salvage value of zero. Your minimum desired rate of return is 14%, and the present value factor is 3.4331. Ignoring income taxes, calculate the net present value for both assets. Which assets would you advise buying? Why?

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Finance Basics: Calculate the net present value for both assets
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