Grenada Company is contemplating the acquisition of a machine that costs $54,000 and promises to reduce annual cash operating costs by $14,000 over each of the next 4 years.

PV of $1 (i = 10%; n = 4): 0.683

PV of a series of $1 cash flows (i = 10%, n = 4): 3.170

Which of the following is a proper way to evaluate this investment if the company desires a 10% return on all investments?

Multiple Choice

1. $54,000 0.909 versus $14,000 3.170.

2. 54,000 versus $56,000 3.170.

3. $54,000 versus $56,000 0.683.

4.$54,000 versus $14,000 3.170.

5. $54,000 versus $14,000 4.