Clairmont Corporation Is Considering the Purchase of a Machine That

Multiple Choice

Clairmont Corporation is considering the purchase of a machine that would cost $150,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $18,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $37,000. The company requires a minimum pretax return of 12% on all investment projects. The present value of the annual cost savings of $37,000 is closest to:

A) $133,385
B) $235,070
C) $185,000
D) $20,979