. The management of Penfold Corporation is considering the purchase of a machine that would cost $430,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $95,000 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.):
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Penfold Corporation | ||
Amount $ | Note | |
Net Investment | 430,000.00 | A |
Reduction in labor costs | 95,000.00 | B |
Annuity factor at 13% for 5 years | 3.51723 | C |
Present Value of Net Cashflow | 334,136.97 | D=B*C |
Net Present Value | (95,863.03) | E=D-A |
. The management of Penfold Corporation is considering the purchase of a machine that would cost...
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