ignore Income taxes in this problem.) Riveros, Inc., Is considering the purchase

Question

ignore Income taxes in this problem.) Riveros, Inc., Is considering the purchase of a machine that would cost $136,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $37,000. The machine would reduce labor and other costs by $26,600 per year. Additional working capital of $10,600 would be needed Immedlately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 18% on all investment projects. The net present value of the proposed project is closest to: Click here to view Exhl bit 88-1 and Exhlblt 8B-2 to determine the approprlate discount factoris) using tables. ($25.463) 0 ($9475) ($50.787) O ($35,305) References

Explanation / Answer

Calculate net present value = Present value of cash inflow-Present value of cash outflow

= (26600*4.07757+37000*0.26604+10600*0.26604)-(136000+10600)

Net present value = ($25463)

So answer is a) ($25463)

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