$(94,042) Almenaarez corporation is consiaering tre purcnase ?? a macnine tr at

Question

$(94,042)

Almenaarez corporation is consiaering tre purcnase ?? a macnine tr at woula cost 3¿U,UUU ana woula last Tor / years. Attre end of 7 years, the machine would have a salvage value of $51,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $72,000. The company requires a minimum pretax return of 18% on all investment projects (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. The net present value of the proposed project is closest to: Multiple Choice $(29,522) $(45,536) $5,464

Explanation / Answer

Present value of annual cost savings 274464 =72000*3.812 Present value of salvage value 16014 Less: Investment cost -320000 Net present value -29522 Option 1 ($29522) is correct

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