MakeitRite Company Is Considering the Purchase of a New Machine

Multiple Choice

MakeitRite Company is considering the purchase of a new machine for $80,000. The machine would generate an annual cash flow before depreciation and taxes of $28,778 for five years. At the end of five years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the net present value for the machine?

A) $-0-
B) $5,318
C) $85,318
D) $23,744