Question
23. The production department is proposing the purchase of an automatic insertion machine. It has identified 3machines, each with an estimated life of 10 years.
23. The production department is proposing the purchase of an automatic insertion machine. It has identified 3machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return?
| Machine A | Machine B | Machine C |
Annual net cash flows | $50,000 | $40,000 | $75,000 |
Average investment | $250,000 | $300,000 | $500,000 |
a. Machine B only
b. Machine C only
c. Machines A and B
d. Machine A only
24. T-Bone Company is contemplating investing in a new piece of manufacturing machinery. The amount to beinvested is $150,000. The present value of the future cash flows is $141,000. Should the company invest in thisproject?
a. yes, because net present value is +$9,000
b. yes, because net present value is $9,000
c. no, because net present value is +$9,000
d. no, because net present value is $9,000
25. All of the following qualitative considerations may impact upon capital investment analysis except
a. manufacturing productivity
b. manufacturing sunk cost
c. manufacturing flexibility
d. market opportunities
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