Clemente Company Is Considering the Purchase of a New Machine

Multiple Choice

Clemente Company is considering the purchase of a new machine for $160,000. The machine would generate an annual cash flow before depreciation and taxes of $62,588 for four years. At the end of four 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) ($45,952)
B) $162,640
C) $30,080
D) $2,640