The management of Penfold 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 $67,000 per year. The company requires a minimum pretax return of 7% on all investment projects.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Question

Quizplus · Accepted Answer

The net present value of the proposed project is closest to $(48,937).The present value of the cash inflows is $364,900 ($67,000 x 7 / 1.07). The present value of the cash outflows is $410,000. The net present value is $364,900 - $410,000 = $(48,937).

The Management of Penfold Corporation Is Considering the Purchase of a Machine