2. Joanette, Incorporated, is considering the purchase of a machine that would cost $430,000 and would last
Question:
2. Joanette, Incorporated, is considering the purchase of a machine that would cost $430,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $43,000. The machine would reduce labor and other costs by $103,000 per year. Additional working capital of $5,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)
Required:
Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly