The Valdosta Vanilla Company has a decision to make. One option is to invest in a new computer system for $127,000, which will yield a yearly cash flow of $30,000 for the next 6 years. The second option is to purchase a new extracting machine that will cost $246,000 and will yield yearly cash flows of $60,000 for the next 5 years. The rate of return for both opportunities is 10%. After consulting the annuity table, management determined that the computer system opportunity has an annuity factor of 4.35526 and the annuity factor for the extracting machine is 3.79079. If Valdosta uses the net present value to make its decisions, which opportunity should it pursue?

Answer rating: 100% (QA)

To determine which opportunity Valdosta Vanilla Company should pursue we can calculate the Net Prese... View the full answer