You Are Considering Investing $600,000 in a New Automated Inventory

Multiple Choice

You are considering investing $600,000 in a new automated inventory system that will provide after-tax cost savings of $50,000 next year.These cost savings are expected to grow at the same rate as sales.If sales are expected to grow at 5% per year and your cost of capital is 10%,then what is the NPV of the automated inventory system?

A) $400,000
B) $500,000
C) -$100,000
D) $1,000,000