The management of Penfold Corporation is considering the purchase of a machine that would cost $320,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $62,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor (s) using the tables provided The net present value of the proposed project is closest to (ignore income taxes.) : Multiple Choice O$ (65,118) O$ (8.118) $ (127118) O$319,997)

Question

Business

Mikayla Roy

28 August, 20:08

The management of Penfold Corporation is considering the purchase of a machine that would cost $320,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $62,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor (s) using the tables provided The net present value of the proposed project is closest to (ignore income taxes.) : Multiple Choice O$ (65,118) O$ (8.118) $ (127118) O$319,997)

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Answers (1)

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Giovani Joyce · Answer 1

($65,118)

Explanation:

The computation of net present value is shown below:-

Machine cost = $320,000

Savings yearly = $62,000

Periods yearly = 6

PVIFA for 12% and 6 years = 4.111

Present value of cash inflows = Savings yearly * PVIFA for 12% and 6 years

= $62,000 * 4.111

= $254,882

Net present value = Present value of cash inflows - Investment

= $254,882 - $320,000

= ($65,118)