Paragas, Inc., is considering the purchase of a machine that would cost $370,000 and would last for 8 years. At the end of 8 yea
rs, the machine would have a salvage value of $52,000. The machine would reduce labor and other costs by $96,000 per year. Additional working capital of $4,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 19% on all investment projects. (Ignore income taxes.)
The combined present value of the working capital needed at the beginning of the project and the working capital released at the end of the project is closest to:
A. $(3,004)
B. $0
C. $(12,080)
D. $11,816
The combined present value of the working capital needed at the beginning of the project and the working capital released at the end of the project is closest to:
A. $(3,004)
B. $0
C. $(12,080)
D. $11,816
1 answer:
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