The management of Penfold Corporation is considering the purchase of a machine that would cost...
Question:
The management of Penfold Corporation is considering the purchase of a machine that would cost $270,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $60,000 per year. The company requires a minimum pretax return of 12% on all investment projects.
The net present value of the proposed project is _____.
Net Present Value:
Net present value is a method to determine the present value of all cash flow generated from the investment. For a feasible project, the present value of all the cash flow should be positive.
Answer and Explanation: 1
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View this answerThe net present value of the proposed project is -$53,713.8
The calculation is shown below.
{eq}NPV \ = \ \left ( Labor \ and \ other \ costs \...
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How to Calculate Net Present Value: Definition, Formula & Analysis
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