ABC Corporation has a machine that requires repairs or should be replaced. ABC has evaluated the
Question:
ABC Corporation has a machine that requires repairs or should be replaced. ABC has evaluated the two options and calculated the cash flows resulting from each option as follows:
Option A: Repair the Machine
Year Cash Flow
0 $61,500.00
1 $16,500.00
2 $33,100.00
3 $17,500.00
4 $17,200.00
5 $10,700.00
Option B: Buy a new Machine
Year Cash Flow
0 $340,500.00
1 $54,300.00
2 $123,000.00
3 $113,800.00
4 $122,900.00
5 $120,100.00
Conduct the analysis and calculate Payback period for each option, IRR of each option and PI and NPV for each option at four Discount Rates ( R ) of 8%, 12%, 16%, and 20%
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw