Question

The management of Penfold Corporation is considering the purchase of a machine that would cost $360,000, would last for 10 years, and would have no salvage value. The machine would reduce labor and other costs by $50,000 per year. The company requires a minimum pretax return of 9% on all investment projects. Click here to view Exhibit 12B-1 and Exhibit 12B-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.):

Answer 1

the net present value is -$72,050

Step-by-step explanation:

The computation of the net present value is shown below

= $50,000 per year ×PVIFA factor at 10 years for 9% - $360,000

= $50,000 ×5.7590 - $360,000

= $287,950 - $360,000

= -$72,050

hence, the net present value is -$72,050

So the same should be relevant and considered too