ABC Corporation is considering the purchase of a machine that would cost $170,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $19,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $41,000. The company requires a minimum pretax return of 11% 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: (Round your intermediate calculations and final answer to the neare

-$7,193

Explanation:

The computation of the net present value is shown below:

Year   Cash Inflows   PV factor at 11%      Present value

0      $170,000            1                           $170,000 (A)

1         $41,000            0.9009009             $36,936.94

2        $41,000            0.8116224                $33,276.52

3        $41,000            0.7311914                 $29,978.85

4        $41,000            0.6587310               $27,007.97

5       $41,000            0.5934513               $24,331.50

5       $19,000            0.5934513               $11,275.58

Total                                                         $162,807.35   (B)

Net Present Value (NPV)                     -$7,193  (B - A)

It is a difference between the cash inflow and the cash outflows

a

explanation:

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