Question: Stainless Shine a chain of dry cleaning stores has the

Stainless Shine, a chain of dry- cleaning stores, has the opportunity to invest in one of two dry cleaning machines; Machine A has a four-year expected life and a cost of $50,000. It will cost an additional $6500 to have the machine delivered and installed, and the expected residual value at the end of four years is $4,000. Machine B has a four-year expected life and a cost of $80,000. It will cost an additional $7,000 to have the machine delivered and installed, and the expected residual value at the end of four years is $6,000. Stainless has a required rate of return of 14 percent. Additional cash flows related to the machines are as follows:



Required
a. Ignoring taxes, determine the net present value of investing in machine A.
b. Ignoring taxes, determine the net present value of investing in machine 8. c Which, if any, machine should bepurchased?
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  • CreatedSeptember 23, 2013
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