A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000. The firm's current fixed costs are $9,000 and current marginal costs are $15. The firm currently charges $18 per unit. If the interest rate is 5% then the present value of the cash flows is O a. $6,020.41 O b. $51,020.41 O c.-$7,380.95 O d. $10,000

A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000. The firm's current fixed costs are $9,000 and current marginal costs are $15. The firm currently charges $18 per unit. If the interest rate is 5% then the present value of the cash flows is O a. $6,020.41 O b. $51,020.41 O c.-$7,380.95 O d. $10,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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A cloth manufacturing firm is deciding whether or not to invest in new machinery. The machinery costs $45,000 and is expected to increase cash flows
in the first year by $25,000 and in the second year by $30,000. The firm's current fixed costs are $9,000 and current marginal costs are $15. The firm
currently charges $18 per unit. If the interest rate is 5% then the present value of the cash flows is
O a. $6,020.41
O b. $51,020.41
O c. -$7,380.95
O
d. $10,000

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