Pad 12:34 PM ezto.mheducation.com connect. brandon tolbert ACCT5103 Spring2018:

Question

Pad 12:34 PM ezto.mheducation.com connect. brandon tolbert ACCT5103 Spring2018: Z01 ACCOUNTING Q3 7&8 instructions help Question 12 (of 12) Save & Exit Submit Time remaining: 0:49:02 12. (Ignore income taxes in this problem.) The management of Mashiah Corporation is considering the purchase of a machine that would cost $410,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $106,000 per year. The company requires a minimum pretax return of 8% on all investment projects. Click here to view Exhibit 88-1 and Exhibit 88-2 to determine the appropriate discount factorls) using tables The present value of the annual cost savings of $106,000 is closest to: O $993,052 O $742.000 $339,912 O $551,836

Explanation / Answer

Answer: $551,836

Present value of annual cost savings = $106000 x PVA of $1 (n=7, i=8%) = $106000 x 5.206 = $551836

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