(Ignore income taxes in this problem. )Mcclam,Inc. ,is considering the purchase of a machine that would cost $100,000 and would last for 9 years.At the end of 9 years,the machine would have a salvage value of $23,000.The machine would reduce labor and other costs by $19,000 per year.Additional working capital of $2,000 would be needed immediately.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 13% on all investment projects.The net present value of the proposed project is closest to:

Question

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the annual savings and the salvage value at the required rate of return, subtracting the initial investment and adding back the recovered working capital. The NPV closest to $3,833 indicates that the project meets the required return.

(Ignore Income Taxes in This Problem