Corin Corporation is considering the purchase of a machine that would cost $420,

Question

Corin Corporation is considering the purchase of a machine that would cost $420,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $97,000. The machine would reduce labor and other costs by $76,000 per year. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)

Compute the net present value of the project by inputting the variables that are entered into your calculator / Excel. (If a variable is not used in the calculation, input a zero (0)Round answers to the nearest dollar and use a minus sign for negative numbers.

Corin Corporation is considering the purchase of a machine that would cost $420,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $97,000. The machine would reduce labor and other costs by $76,000 per year. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)

Explanation / Answer

Yes machine should be purchased

0 -420,000 -420000 1 76000 65,517 2 76000 56,480 3 76000 48,690 4 76000 41,974 5 76000 36,185 6 76000 31,194 7 76000 26,891 8 76000 23,182 salvage value 97000 Net Present value 7112.91

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