The management of Serpas Corporation is considering the purchase of a machine th
ID: 2381460 • Letter: T
Question
The management of Serpas Corporation is considering the purchase of a machine that would cost $180,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $31,000 per year. The company requires a minimum pretax return of 7% on all investment projects. (Ignore income taxes.)
The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
The management of Serpas Corporation is considering the purchase of a machine that would cost $180,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $31,000 per year. The company requires a minimum pretax return of 7% on all investment projects. (Ignore income taxes.)
Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.
The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
The management of Serpas Corporation is considering the purchase of a machine that would cost $180,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $31,000 per year. The company requires a minimum pretax return of 7% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables. The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.) ?$47,570 $6,000 $41,143 ?$32,223Explanation / Answer
discount factor for annuity, 6 years, 7% = 4.767
31,000*4.767 = 147,777
net present value = 147,777 - 180,000 = -32223
answer: -32,223
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