Joanette, Inc., is considering the purchase of a machine that would cost $430,00

Question

Joanette, Inc., is considering the purchase of a machine that would cost $430,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $43,000. The machine would reduce labor and other costs by $103,000 per year. Additional working capital of $5,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 138-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided Required: Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.) Net present value

Explanation / Answer

Net present value : Present value of cash inflow- Present value of cash outflow

= (103000*3.696+43000*.593+5000*.593)-(430000+5000)

Net present value = (25848)

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