Joanette, Incorporated, Is Considering the Purchase of a Machine That

Essay

Joanette, Incorporated, is considering the purchase of a machine that would cost $240,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $48,000. The machine would reduce labor and other costs by $62,000 per year. Additional working capital of $7,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 17% 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.