The management of Urbine Corporation is considering the purchase of a machine th

Question

The management of Urbine Corporation is considering the purchase of a machine that would cost $430,000 would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $95,000 per year. The company requires a minimum pretax return of 13% on all investment projects. (Ignore income taxes in this problem.) Click here to view Exhibit 13B-1 and 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.) -$95,885 -$15,885 -$139,325 -$52,445

Explanation / Answer

NPV- A -$95885

Year Cash Flow PVF@13% CF*PVF@5% 0 -$430,000.00 1.0000 -$430,000 1 $95,000.00 0.8850 $84,075 2 $95,000.00 0.7830 $74,385 3 $95,000.00 0.6930 $65,835 4 $95,000.00 0.6132 $58,254 5 $95,000.00 0.5428 $51,566 NPV -$95,885

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