The management of Penfold Corporation is considering the purchase of a machine that would cost $320,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $62,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using the tables provided The net present value of the proposed project is closest to (ignore income taxes.): Multiple Choice O$(65,118) O$(8.118) $(127118) O$319,997)

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Answer:

($65,118)

Explanation:

The computation of net present value is shown below:-

Machine cost = $320,000

Savings yearly = $62,000

Periods yearly = 6

PVIFA for 12% and 6 years = 4.111

Present value of cash inflows = Savings yearly × PVIFA for 12% and 6 years

= $62,000 × 4.111

= $254,882

Net present value = Present value of cash inflows - Investment

= $254,882 - $320,000

= ($65,118)