(Ignore income taxes in this problem.) The management of Mashiah Corporation is considering the purchase of a machine that would cost $370,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $118,000 per year. The company requires a minimum pretax return of 11% on all investment projects.

Click here to view Exhibit 8B-1 and Exhibit 8B-2 to determine the appropriate discount factor(s) using tables.

The present value of the annual cost savings of $118,000 is closest to:

$997,232

$826,000

$344,092

$556,016