Question
ABC Corporation has a machine that requires repairs or should be replaced. ABC as evaluated the two options and calculated the cash flows resulting from
ABC Corporation has a machine that requires repairs or should be replaced. ABC as evaluated the two options and calculated the cash flows resulting from each option as follows:
| R |
| 8% |
| 12% |
| 16% |
| 20% |
Option A: Repair the machine
| Year | Cash Flow |
| 0 | -$61,000.00 |
| 1 | $15,500.00 |
| 2 | $33,100.00 |
| 3 | $17,500.00 |
| 4 | $17,200.00 |
| 5 | $10,700.00 |
Option B: Buy a new machine
| Year | Cash Flow |
| 0 | -$340,000.00 |
| 1 | $53,300.00 |
| 2 | $123,000.00 |
| 3 | $113,800.00 |
| 4 | $122,900.00 |
| 5 | $120,100.00 |
Write a memo to your boss, explaining the results of your analysis, your decision to choose project A or B using payback period, IRR, PI and NPV to write the memo.
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Personal Finance
Authors: Jeff Madura
5th edition
132994348, 978-0132994347
