Clairmont Corporation Is Considering the Purchase of a Machine That

question 89

Multiple Choice

Clairmont Corporation is considering the purchase of a machine that would cost $150,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $18,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $37,000. The company requires a minimum pretax return of 12% on all investment projects. The present value of the annual cost savings of $37,000 is closest to:

• A)$133,385
• B)$235,070
• C)$185,000
• D)$20,979

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