The management of serpas corporation is considering the purchase of a machine that would cost $180,000, would last for 5 years, and would have no salvage value. the machine would reduce labor and other costs by $46,000 per year. the company requires a minimum pretax return of 13% on all investment projects. the net present value of the proposed project is closest to: a. $27,138 b. $50,000 c. -$18,218 d. -$33,565

Salvage value is an asset's anticipated book value after depreciation, based on what a firm anticipates obtaining in exchange for the asset at the end of its useful life. As a result, an asset's projected salvage value is a key factor in determining a depreciation schedule.

Saving costs of $46000 per year can be considered as an annuity for 5 years.

The present value of an annuity of 1 for 13% is

(1-(1+0.13)-5)/0.13 = 3.517

Thus, the present value of an annuity

46000 - $46000 x 3.517 = $161782

The initial investment is $180,000.

Thus the net present value is

161782 - 180000 = -$18218

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