Rollerblade, a maker of skating gear, is evaluating two alternative presses. Press A costs $$88,000,$ has a $4-$year life, and is expected to generate annual cash inflows of $$30,100$ in each of the $4$ years. Press B costs $$120,000,$ has an $8-$year life, and is expected to generate annual cash inflows of $$24,800$ in each of $8$ years. The cost of replacement for Press A is $$94,000,$ and the replacement press will generate cash inflows of $$30,100$ for another $4$ years. Rollerblade uses a $11\%$ cost of capital. Which press should be chosen?

Question $22$Answer

a$.$

Press A $=$ $$516\mathrm{.}22$

b$.$

Press B $=$ $$203\mathrm{.}94$

c$.$

Press B $=$ $$7,623\mathrm{.}84$

d$.$

Press A $=$ $$66,898\mathrm{.}30$

e$.$

Press A $=$ $$4,977\mathrm{.}58$