Question
(Ignore income taxes in this problem.) Riveros, Inc., is considering the purchase of a machine that would cost $125,000 and would last for 8 years.
(Ignore income taxes in this problem.) Riveros, Inc., is considering the purchase of a machine that would cost $125,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $31,500. The machine would reduce labor and other costs by $25,500 per year. Additional working capital of $9,500 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 18% on all investment projects. The net present value of the proposed project is closest to:
Click here to view Exhibit 8B-1 and Exhibit 8B-2 to determine the appropriate discount factor(s) using tables.
($27,984)
($41,417)
($10,489)
($19,605)
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