Question
Janes, Inc., is considering the purchase of a machine that would cost $530,000 and would last for 6 years, at the end of which, the
Janes, Inc., is considering the purchase of a machine that would cost $530,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $53,000. The machine would reduce labor and other costs by $113,000 per year. Additional working capital of $7,000 would be needed immediately, all of which would be recovered at the end of 6 years. The company requires a minimum pretax return of 12% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using tables. Required: Determine the net present value of the project.
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