Question

Almendarez Corporation is considering the purchase of a machine that would cost $170,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $19,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $41,000. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.)

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: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Multiple Choice

$(7,197)

$16,117

$(35,000)

$(22,544)

Answer 1

Correct answer---$(7,197)

Year	Cash Inflows	PV factor at 11%	Present value
1	$   41,000	0.9009009	$         36,936.94
2	$   41,000	0.8116224	$         33,276.52
3	$   41,000	0.7311914	$         29,978.85
4	$   41,000	0.6587310	$         27,007.97
5	$   41,000	0.5934513	$         24,331.50
5	$   19,000	0.5934513	$         11,275.58
Total			$       162,807.35
(-) Initial Cost			$             170,000
Net Present Value (NPV)			$               (7,193)

My answer is different only due to round off .