Janes Inc is considering the purchase of a machine that woul

Janes, Inc., is considering the purchase of a machine that would cost $540,000 and would last for 10 years, at the end of which, the machine would have a salvage value of $54,000. The machine would reduce labor and other costs by $114,000 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 18% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: Determine the net present value of the project

Solution

Determine the net present value of the project