Capital Investment Decision: Comprehensive The Arcadia Manufacturing Company, based in Arcadia, Florida, is one of the fastest growing companies in its industry. According to Ms. Prinze, the companys production vice president, keeping up to-date with technological changes is what makes the company successful. Prinze believes a new machine will fill an important need. The machine has an estimated usefull life of for years, a purchase price of $250,000, and a residual value of $25,000. The company controller has estimated average annual net income of $11,250 and the following flows for the new machine: Cash Flow Estimates YEAR CASH INFLOWS CASH OUTFLOWS NET CASH INFLOWS 1 $325,000 $250,000 $75,000 2 $320,000 $250,000 $70,000 3 $315,000 $250,000 $65,000 4 $310,000 $250,000 $60,000 Prinze uses a 12% minimum rate of return and a three-year payback period for capital investment evaluation purposes. Questions: 1. Analysis the data about the machine, and decide of the company should purchase it. Use the following evaluation approaches in your analysis: a. The net present value method b. The accounting rate-of-return method c. The payback period method. Use Tables 1 and 2 in the appendix on present value tables. 2. Summarize the information generated in requirement 1, and make a recommendation to Prinze Table #1 Present Value Tables Periods 12% 1 0.893 2 0.797 3 0.712 4 0.636 5 0.567 6 0.507 7 0.452 8 0.404 9 0361 10 0.322 11 0.287 12 0.257 13 0.229 14 0.205 15 0.183 16 0.163 17 0.146 18 0.130 19 0.116 20 0.104 21 0.093 22 0.083 23 0.074 24 0.066 25 0.059 26 0.053 27 0.047 28 0.042 29 0.037 30 0.033 40 0.011 50 0.003 Table #2 Present Value Tables Periods 12% 1 0.893 2 1.690 3 2.402 4 3.037 5 3.605 6 4.111 7 4.564 8 4.968 9 5.328 10 5.650 11 5.938 12 6.194 13 6.424 14 6.628 15 6.811 16 6.974 17 7.120 18 7.250 19 7.366 20 7.469 21 7.562 22 7.645 23 7.718 24 7.784 25 7.843 26 7.896 27 7.943 28 7.984 29 8.022 30 8.055 40 8.244 50 8.305