Braxton Manufacturing is considering the purchase of new computerized equipment.The machine costs $75,000 and would generate $22,000 in annual cost savings over its 5-year life.At the end of 5 years, the equipment would have a $5,000 salvage value.Braxton's required rate of return is 12%.Using the interest tables, the machine's net present value is
A)$695.
B)$4,305.
C)$7,143.
D)$79,306.

Question

Quizplus · Accepted Answer

The net present value (NPV) is calculated by discounting the annual savings and the salvage value at the required rate of return and subtracting the initial investment. The NPV is $7,143, which is the closest to the calculated value using the given data and interest tables.

Braxton Manufacturing Is Considering the Purchase of New Computerized Equipment