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The management of Penfold Corporation is considering the purchase of a machine that would cost $350,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $82,000 per year. The company requires a minimum pretax return of 12% on all investment projects..

The net present value of the proposed project is closest to (Ignore income taxes.):

$(43,050)

$(65,730)

$(34,390)

$(54,390)

Respuesta :

beritop1089

Answer:

Closest to $(54,390)

Explanation:

With a financial calculator and cashflow "CF" function, input the following to solve for NPV;

Initial investment in machine ; CF0 = -350,000

Yr 1 cashflow; C01 = 82,000

Yr 2 cashflow; C02 = 82,000

Yr 3 cashflow; C03 = 82,000

Yr 4 cashflow; C04 = 82,000

Yr 5 cashflow; C05 = 82,000

and enter interest rate ; I/Y = 12%

then compute; CPT  NPV = -54,408.35

Therefore, net present value of the proposed project is closest to $(54,390)

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