The management of Opray Corporation is considering the purchase of a machine that would cost...
Question:
The management of Opray Corporation is considering the purchase of a machine that would cost $360,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $78,000 per year. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.)
The present value of the annual cost savings of $78,000 is closest to:
A) $177,027.
B) $367,536.
C) $546,000.
D) $763,064.
Present value
The present value of the money is the value of a particular sum today, it is the currently available value of money. The present value is discounted at a certain rate and time to find the future value of the money.
Answer and Explanation: 1
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View this answerIn this question we will be using the Present value of annuity formula which is,
Annuity = A{ {1-(1+r)^-n}/r}
Where ,
A = Amount = 78,000
r = rate...
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How to Calculate Present Value of an Investment: Formula & Examples
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Chapter 24 / Lesson 15
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Calculating the present value of an investment tells how much money needs to be saved now in order to reach a desired, future amount. Explore the definition of and formula for the present value of an investment, and see examples.
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