Joanette, Inc., is considering the purchase of a machine that would cost $420,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $42,000. The machine would reduce labor and other costs by $102,000 per year. Additional working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 17% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 128-1 and Exhibit 128-2 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

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Joanette, Inc., is considering the purchase of a machine that would cost $420,000 and would last for 5 years, at the end of which, the
machine would have a salvage value of $42,000. The machine would reduce labor and other costs by $102,000 per year. Additional
working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires
a minimum pretax return of 17% on all investment projects. (ignore income taxes.)
Click here to view Exhibit 128-1 and Exhibit 128-2 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
Transcribed Image Text:Joanette, Inc., is considering the purchase of a machine that would cost $420,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $42,000. The machine would reduce labor and other costs by $102,000 per year. Additional working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 17% on all investment projects. (ignore income taxes.) Click here to view Exhibit 128-1 and Exhibit 128-2 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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