Answered step by step
Verified Expert Solution
Question
1 Approved Answer
6. Justin Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will produce cash flows as follows: Machine A Machine B End of
6. Justin Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will produce cash flows as follows: Machine A Machine B End of Year $5,000 $4,000 $3,000 $1,000 $2,000 $12,000 Justin Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investments. The present value factors of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which machine should Justin purchase and why? Hint: This is a two-part question. Part 1. Make sure you calculate the NPV for both machines and Part 2. Which machine should the company invest in and why? (3 points) Respond to both parts of this problem on the next page
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started