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Problem 9-3

Albert Shoe Company is considering investing in one of two machines that attach heels to shoes. Machine A costs $68,500 and is expected to save the company $20,120 per year for six years. Machine B costs $95,030 and is expected to save the company $25,120 per year for six years.

Determine the net present value for each machine if the required rate of return is 10 percent. (Ignore taxes.) (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to 0 decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net present value

Machine A ___________$

Machine B___________ $

Decide which machine should be purchased.

(Machine A/MachineB) should be purchased.