Asked by Devon Westerlund on Jul 04, 2024
Verified
The net present value of the proposed project is closest to:
A) $15,646
B) $89,588
C) $7,536
D) $186,000
Proposed Project
A planned set of interrelated tasks to be executed over a fixed period and within certain cost and other limitations.
Net Present Value
The divergence in current value of cash inflows versus outflows over an established time frame.
- Develop proficiency in evaluating the net present value (NPV) of different projects.
Verified Answer
BA
Branden AlvarezJul 10, 2024
Final Answer :
C
Explanation : 
Reference: CH12-Ref12
(Ignore income taxes in this problem.)Paragas, Inc., is considering the purchase of a machine that would cost $370,000 and would last for 8 years.At the end of 8 years, the machine would have a salvage value of $52,000.The machine would reduce labor and other costs by $96,000 per year.Additional working capital of $4,000 would be needed immediately.All of this working capital would be recovered at the end of the life of the machine.The company requires a minimum pretax return of 19% on all investment projects.
Reference: CH12-Ref12(Ignore income taxes in this problem.)Paragas, Inc., is considering the purchase of a machine that would cost $370,000 and would last for 8 years.At the end of 8 years, the machine would have a salvage value of $52,000.The machine would reduce labor and other costs by $96,000 per year.Additional working capital of $4,000 would be needed immediately.All of this working capital would be recovered at the end of the life of the machine.The company requires a minimum pretax return of 19% on all investment projects.
Learning Objectives
- Develop proficiency in evaluating the net present value (NPV) of different projects.