Abc corporation is considering the purchase of a machine that would cost $110,000 and would last for 4 years. at the end of 4 years, the machine would have a salvage value of $16,000. by reducing labor and other operating costs, the machine would provide annual cost savings of $30,000. the company requires a minimum pretax return of 12% 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. the net present value of the proposed project is closest to:

-$8,705

Explanation:

The computation of the Net present value is shown below

= Present value of all yearly cash inflows after applying discount factor + salvage value - initial investment

where,

The Initial investment is $110,000

All yearly cash flows would be

= Annual cost savings × PVIFA for 4 years at 12%

= $30,000 × 3.0373

= $91,119

Refer to the PVIFA table

And, the salvage value would be

= Salvage value × pvif for 4 years at 12%

= $16,000 × 0.636

= $10,176

The discount factor should be computed by

= 1 ÷ (1 + rate) ^ years

Now put these values to the above formula  

So, the value would equal to

= $91,119 + $10,176 - $110,000

= -$8,705

correct, but each time you dont pay the price of the penalty can increase.