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Al a Mode, Inc., is considering one of two investment options. Option 1 is a $47,000 investment in new blending equipment that is expected to
Al a Mode, Inc., is considering one of two investment options. Option 1 is a $47,000 investment in new blending equipment that is expected to produce equal annual cash flows of $15,000 for each of seven years. Option 2 is a $50,000 investment in a new computer system that is expected to produce equal annual cash flows of $19,000 for each of five years. The residual value of the blending equipment at the end of the fifth year is estimated to be $10,000. The computer system has no expected residual value at the end of the fifth year. Present Value of $1 at Compound Interest 10% 20% 0.833 0.694 0.579 0.482 0.747 0.621 0.567 0.4970.402 0.335 0.279 0.627 0.467 0.404 0.327 0.233 0.194 0.558 0.386 0.322 0.247 0.162 15% .943 909 0.893 0.870 0.890 0.826 0.7970.756 0.840 0.751 0.712 0.658 0.572 Year 696 12% 4 0.792 0.683 0.636 0.705 0.564 0.507 0.432 7 0.665 0.513 0.452 0.376 0.592 0.424 0.361 0.284 10
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