(Ignore income taxes in this problem.) The management of Mashiah Corporation is

Question

(Ignore income taxes in this problem.) The management of Mashiah Corporation is considering the purchase of a machine that would cost $290,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $102,000 per year. The company requires a minimum pretax return of 13% on all investment projects.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table.

The net present value of the proposed project is closest to:

$154,663

$322,000

$117,796

$245,246

Explanation / Answer

Present value of annual cash flows 407796 =102000*3.998 Less: Investment 290000 Net present value 117796 Option 3 is correct

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