Lee Caterers Ltd. is about to make an investment in new kitchen equipment. It is considering whether to replace the existing kitchen equipment with cook/freeze or cook/chill technology. The following cash flows are expected from each form of technology:

The business would expect to replace the new equipment purchased with similar equipment at the end of its life. The cost of capital for the business is 10%.
Required:
Which type of equipment should the business invest in? Use both approaches considered in the chapter to support your conclusions and round present value factors to two decimals.

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Cook/Freeze ($000) (390) Initial cost 1 year's time 2 years' time 3 years' time 4 years' time 5 years' time 6 years' time 7 years' time 8 years' time Cook/Chill ($000) (200) 85 94 86 62 102 110 110 110 90 85 60