Question

Joanette, Inc., is considering the purchase of a machine that would cost $570,000 and would last for 9 years, at the end of which, the machine would have a salvage value of $57,000. The machine would reduce labor and other costs by $117,000 per year. Additional working capital of $3,000 would be needed immediately, all of which would be recovered at the end of 9 years. The company requires a minimum pretax return of 18% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 12B-1 and Exhibit 12B-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

Answer 1

Answer -1
year	Description	Cash Flows	CV Factor at 18%
0	Intial cost of Equipment & Working Capital	$    -5,73,000	1	$         -5,73,000
1 to 9 years	Cash Outflow Savings	$     1,17,000	4.303021	$          5,03,453
9	Working capital and residual value	$        60,000	0.225456	$             13,527
		NPV		$            -56,019
Net present value of the Project				$                   -56,019

Answer- 2
Option is D $7,558 is correct
Present value of annual cost savings	53074	14000*3.791
Present value of salvage value	2484	4000*0.621
Total present value	55558
Less: Investment cost	48000
Net present value	7558
Option is D $7,558 is correct
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