Almendarez Corporation Is Considering the Purchase of a Machine That

question 80

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 net present value of the proposed project is closest to:

• A) $(29,522)
• B) $(45,536)
• C) $5,464
• D) $(94,042)

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Definitions:

Litigation

The process of taking legal action in court to resolve disputes between parties.

Joining

The act of becoming a member or part of a group, organization, or legal proceeding.

Accident

An unforeseen and unplanned event or circumstance, often resulting in damage or injury.

Tender Offer

A corporate finance term referring to an open offer to purchase some or all of shareholders' shares in a corporation at a specific price for a specified time.