Mobil Asphalt Paving Company has received two proposals for a new Asphalt Paving Machine. Information provided for each machine is as follows: Big Boss Paver Perfect PaverModel 700Model 777Capital investment$995,000$575,000Annual cash flows$170,000$95,000Estimated useful life10 years10 yearsMobil Company uses a discount rate of 9% to evaluate both projects.Note: Factor for the Present Value of an Ordinary Annuity 10 years @9% = 6.41766

Instructions

(a) Calculate the net present value of both projects

(b) Calculate the profitability index for each project

.(c) Which project should Mobil accept?

(d) What might be some “qualitative” factors to consider?

Answer rating: 100% (QA)

a The net present value of the Big Boss Paver is 995... View the full answer