Question
(Ignore income taxes in this problem.) Gillaspie, Inc., is considering the purchase of a machine that would cost $300,000 and would last for 5 years.
(Ignore income taxes in this problem.) Gillaspie, Inc., is considering the purchase of a machine that would cost $300,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $51,000. The machine would reduce labor and other costs by $86,000 per year. Additional working capital of $10,000 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 combined present value of the working capital needed at the beginning of the project and the working capital released at the end of the project is closest to:
Select one:
a.-$8,420
b.$25,170
c.-$4,570
d.$0
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