Advise the Manson Mothers, if should make this investment or not?
Mason Field Motors is evaluating a capital investment opportunity. This project would require an
initial investment of $30,000 to buy one machine and $10,000 to buy the other machine (both
machines are needed).
The project equipment will have a residual value at the end of its life of $3,000. The useful life of
the equipment is 5 years. The new project is expected to generate additional net
$12,000 per year for each of the five years.
Mansfield Motors' required
Present value of future annuity at 14% for 5 yrs is 3.4331
(Table A-4 Present Value Interest Factors for a One-Dollar Annuity Discounted)
Present value of future dollar at 14% on year 5 is= .5194
(Table A-3 Present Value Interest Factors for One Dollar Discounted)
Requirement:
Advise the Manson Mothers, if should make this investment or not?
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