Joanette, Incorporated, is considering the purchase of a machine that would cost $620,000 and would last for 10 years, at the end of which, the machine would have a salvage value of $62,000. The machine would reduce labor and other costs by $122,000 per year. Additional working capital of $8,000 would be needed immediately, all of which would be recovered at the end of 10 years. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Required: Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.) Net present value
Joanette, Incorporated, is considering the purchase of a machine that would cost $620,000 and would last for 10 years, at the end of which, the machine would have a salvage value of $62,000. The machine would reduce labor and other costs by $122,000 per year. Additional working capital of $8,000 would be needed immediately, all of which would be recovered at the end of 10 years. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Required: Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.) Net present value
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
Question
![Joanette, Incorporated, is considering the purchase of a machine that would cost $620,000 and would last for 10 years, at the end of
which, the machine would have a salvage value of $62,000. The machine would reduce labor and other costs by $122,000 per year.
Additional working capital of $8,000 would be needed immediately, all of which would be recovered at the end of 10 years. The
company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
Required:
Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate
calculations and final answer to the nearest whole dollar amount.)
Net present value](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0ef90504-d26e-43d9-baec-9ec9067ca391%2Fe743194d-2b2f-4176-aa6d-830a16bf10fa%2F2hozt0l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Joanette, Incorporated, is considering the purchase of a machine that would cost $620,000 and would last for 10 years, at the end of
which, the machine would have a salvage value of $62,000. The machine would reduce labor and other costs by $122,000 per year.
Additional working capital of $8,000 would be needed immediately, all of which would be recovered at the end of 10 years. The
company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
Required:
Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate
calculations and final answer to the nearest whole dollar amount.)
Net present value
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