Sloan Inc. is considering the purchase of new equipment. Estimates of the cost of two machines...

 

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Sloan Inc. is considering the purchase of new equipment. Estimates of the cost of two machines are provided below. Original Cost Estimated Useful Life Salvage Value Estimated Annual Cash Inflows Estimated Annual Cash Outflows Calculate the net present value of each machine. The company uses a 9% interest rate. Machine A Machine B $75,500 $180,000 8 Years 8 Years $0 $0 $40,000 $10,000 $20,000 $5,000 To find the correct factor use Table 4, the Present Value of an Ordinary Annuity. Interest = 9% N (# of periods) = 8 Which machine should they purchase? Sloan Inc. is considering the purchase of new equipment. Estimates of the cost of two machines are provided below. Original Cost Estimated Useful Life Salvage Value Estimated Annual Cash Inflows Estimated Annual Cash Outflows Calculate the net present value of each machine. The company uses a 9% interest rate. Machine A Machine B $75,500 $180,000 8 Years 8 Years $0 $0 $40,000 $10,000 $20,000 $5,000 To find the correct factor use Table 4, the Present Value of an Ordinary Annuity. Interest = 9% N (# of periods) = 8 Which machine should they purchase?

Answer rating: 100% (QA)

To calculate the net present value NPV of each machine we will follow these steps 1 Determine the ne... View the full answer