(Ignore income taxes in this problem.) Sibble Corporation is considering the pur

Question

(Ignore income taxes in this problem.) Sibble Corporation is considering the purchase of a machine that would cost $330,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $50,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $76,000. The company requires a minimum pretax return of 12% on all investment projects. The net present value of the proposed project is closest to: (Use exhibit11b-1, exhibit11b-2)

rev: 12_14_2012, 12_21_2012

Explanation / Answer

NPV = 76000 PVIFA(12%,5) + 50,000 PVIF(12%,5) - 330000

= 76000*3.605 + 50000*0.567 -330000

=- $27670

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