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Porus, Corp. is considering the purchase of a machine that would cost $150,000 and would last for 5 years. At the end of 5 years,
Porus, Corp. is considering the purchase of a machine that would cost $150,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $19,000. The machine would reduce costs by $34,000 per year. The company requires a minimum return of 12% on all investment projects.
The net present value of the project is closest to: (factors from Exhibit 12B-1 and Exhibit 12B-2 for an interest rate of 12% are provided below):
Periods | Present Value of $1 | Present Value of an Annuity of $1 |
---|---|---|
1 | 0.893 | 0.893 |
2 | 0.797 | 1.690 |
3 | 0.712 | 2.402 |
4 | 0.636 | 3.037 |
5 | 0.567 | 3.605 |
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