The management of Penfold Corporation is considering the purchase of a machine that would cost $300,000,...

The management of Penfold Corporation is considering the purchase of a machine that would cost $300,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $70,000 per year. The company requires a minimum pretax return of 12% 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.)

Expert Solution

Year	Cash flows	Present Value of 1	Present Value of Cash flows
a	b	c=1.12^-a	d=b*c
0	$ -3,00,000	1.0000	$ -3,00,000.00
1	$ 70,000	0.8929	$ 62,500.00
2	$ 70,000	0.7972	$ 55,803.57
3	$ 70,000	0.7118	$ 49,824.62
4	$ 70,000	0.6355	$ 44,486.27
5	$ 70,000	0.5674	$ 39,719.88

	Net Present Value		$ -47,665.67


Note:
Reduction in costs are the Cash inflow.

ekkarill92 answered 2 years ago

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