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Homework answers / question archive / Joanette, Inc
Joanette, Inc., is considering the purchase of a machine that would cost $550,000 and would last for 6 years, at the end of which, the machine would have a salvage value of $55,000. The machine would reduce labor and other costs by $115,000 per year. Additional working capital of $9,000 would be needed immediately, all of which would be recovered at the end of 6 years. The company requires a minimum pretax return of 12% on all investment projects. (Ignore income taxes.)
Click here to view Exhibit 14B-1 and Exhibit 14B-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.)
