Question

he management of Penfold Corporation is considering the purchase of a machine that would cost $400,000, would last for 10 years, and would have no salvage value. The machine would reduce labor and other costs by $60,000 per year. The company requires a minimum pretax return of 13% on all investment projects.

Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using the tables provided.

The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Answer 1

The present value table are not provided and thus we would calculate the discount factor to calculate net present value of proposed project
Calculation of net present value is shown below
Year	Cash flow	Discount factor @ 13%		Present value (Cash flow*Discount factor)
0	-$400,000	1.00000	1/(1.13^0)	-$400,000
1	$60,000	0.88496	1/(1.13^1)	$53,097
2	$60,000	0.78315	1/(1.13^2)	$46,989
3	$60,000	0.69305	1/(1.13^3)	$41,583
4	$60,000	0.61332	1/(1.13^4)	$36,799
5	$60,000	0.54276	1/(1.13^5)	$32,566
6	$60,000	0.48032	1/(1.13^6)	$28,819
7	$60,000	0.42506	1/(1.13^7)	$25,504
8	$60,000	0.37616	1/(1.13^8)	$22,570
9	$60,000	0.33288	1/(1.13^9)	$19,973
10	$60,000	0.29459	1/(1.13^10)	$17,675
Net present value				-$74,425
Thus, net present value of proposed project is -$74,425