The management of Penfold Corporation is considering the purchase of a machine t
ID: 2595109 • Letter: T
Question
The management of Penfold Corporation is considering the purchase of a machine that would cost $440,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $99,000 per year. The company requires a minimum pretax return of 13% on all investment projects.
Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided.
The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Multiple Choice
$(91,817)
$(9,817)
$(136,343)
$(47,291)
Explanation / Answer
Net present value of the proposed project=(99000*3.517)-440000= -91817 Option 1 is correct
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