Question
11.4. Which of the following are relevant cash flows in the evaluation of a proposal to produce a new product? 11.5 Managers of central Embroidery
11.4. Which of the following are relevant cash flows in the evaluation of a proposal to produce a new product?
11.5 Managers of central Embroidery have decided to purchase a new monogram machine and are considering two alternative machines. The first machine cost $100,000 and is expected to last five years. The second machine cost $160,000 and is expected to last eight years. Assume that the opportunity cost of capital is 8 percent. Which machine should central Embroidery purchase?
11.6. You inherited an apple orchard and want to sell it in the next four years. An expert in apple orchard valuation has estimated the after-tax cash flow you would receive if you sold at the end of each of the nest four years as follows: $1,000,000 if you sell in one year; $1,300,000 if you sell in two years; $1,500,000 if you sell in three years; and $1,600,000 if you sell in four years. Your opportunity cost of capital is 10 percent. When should you sell the orchard?
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