Question
The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and have asked the accountant to analyze them
The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and have asked the accountant to analyze them to determine which of the proposals (if any) meet or exceed the company's policy of a minimum desired rate of return of 10% using the net present value method. Each of the assets has an estimated useful life of 10 years. The accountant has identified the following data: Machine A Machine B Machine C Present value of future cash flows computed using 10% rate of return $305,000 $295,000 $300,000 Amount of initial investment 300,000 300,000 300,000 Which of the investments are acceptable?
a. Machine B only
b. Machines B & C
c. Machines A & C
d. Machine A only
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