The management of Urbine Corporation is considering the purchase of a machine that would cost $320,000...

The management of Urbine Corporation is considering the purchase of a machine that would cost $320,000 would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $75 ,000 per year. The company requires a minimum pretax return of 12% on all investment projects. (Ignore income taxes in this problem.) The net present value of the proposed project is closest to:

— $72 305
–$9,625
–$26,945
–$49,626

Expert Solution

–$49,626
Statement showing Cash flows			Project E
Particulars	Time	PVf 12%	Amount	PV
Cash Outflows	-	1.00	(320,000.00)	(320,000.00)
PV of Cash outflows = PVCO				(320,000.00)
Cash inflows	1.00	0.8930	75,000.00	66,975.00
Cash inflows	2.00	0.7970	75,000.00	59,775.00
Cash inflows	3.00	0.7120	75,000.00	53,400.00
Cash inflows	4.00	0.6360	75,000.00	47,700.00
Cash inflows	5.00	0.5670	75,000.00	42,525.00
PV of Cash Inflows =PVCI				270,375.00
NPV= PVCI - PVCO				(49,625.00)

ekkarill92 answered 1 year ago

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