Accounting Multiple Choice Question – 21 September 2023

Alex ltd is considering buying equipment at a cost of £80,000.

This equipment will save £40,000 per annum in operating costs over the next three years, after which it will have no scrap value.

Using the following discount factors:

• year 0 – 1.000
• year 1 – 0.909
• year 2 – 0.826 
• year 3 – 0.751

What is the net present value of the equipment?

Select ONE answer:

1. £(10,600)
2. £19,440
3. £40,000
4. £99,440

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct = -£80k + (£40k *0.909) + (£40k * 0.826) + (£40k * 0.751)
3. Not correct
4. Not correct

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