Almendarez Corporation Is Considering the Purchase of a Machine That

question 136

Multiple Choice

Almendarez Corporation is considering the purchase of a machine that would cost $320,000 and would last for 7 years. At the end of 7 years, the machine would have a salvage value of $51,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $72,000. The company requires a minimum pretax return of 18% on all investment projects. (Ignore income taxes.) Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.
The present value of the annual cost savings of $72,000 is closest to:

• A) $22,608
• B) $874,298
• C) $504,000
• D) $274,464

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Definitions:

Collective Unconscious

A concept proposed by Carl Jung, suggesting that part of the deepest unconscious mind is genetically inherited and common to all human beings, containing universal archetypes.

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