10.1

restion 10.1 (Total:27 marks) Bowser Company's required rate of return is 14\%. The company is considering the purchase of thre machines, as indicated below. Consider each machine independently. (Ignore income taxes in this problem.) Required: 1. Machine A will cost $20,000 and will have a useful life of 15 years. Its salvage value will be $1,80. and cost savings are projected at $4,000 per year. Calculate the machine's net present value. 2. How much should Bowser Company be willing to pay for Machine B if the machine promises annual cash inflows of $6,000 per year for eight years? 3. Machine C has a projected life of ten years. What is the rachine's internal rate of return if it costs $40,000 and will save 7,000 annually in cash operating cetsts? Would you recommend to Bowser Company to purchase Machine C ? Explain