Sibble Corporation is considering the purchase of a machine that would cost $300

Question

Sibble Corporation is considering the purchase of a machine that would cost $300,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $47,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $73,000. The company requires a minimum pretax return of 12% on all investment projects. The net present value of the proposed project is closest to: (Round your 'PV factors' to three decimal places.)

-$10,186

-$36,835

-$41,391

-$10,165

Explanation / Answer

SIBBLE CORPORATION NET PRESENT VALUE Year Cash Flow P.V Factor @12% for 5 Years P.V. Initial Investment 0 $   (300,000.00) 1 $ (300,000.00) Operating Cash Flow 1-5 Years $        73,000.00 3.6048 $    263,150.40 Salvage Value 5 Year $        47,000.00 0.56743 $      26,669.21 NPV $    (10,180.39) Ans) $10186

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