Machine A Machine B Which machine should be selected using the Net present value, (cost of capital = 10%) method? Machine A Machine B Which machine should be selected using the Net present value, (cost of capital = 12%) method? Machine A Machine B
Machine A Machine B Which machine should be selected using the Net present value, (cost of capital = 10%) method? Machine A Machine B Which machine should be selected using the Net present value, (cost of capital = 12%) method? Machine A Machine B
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Which machine should be selected using the
Machine A
Machine B
Which machine should be selected using the
Machine A
Machine B
Which machine should be selected using the Net present value, (cost of capital = 12%) method?
Machine A
Machine B
Transcribed Image Text:FM Manufacturing Co. considers the purchase of two differenttypes of machines, Machine A and
Machine B, to manufacture ball bearings, one of the many products it produces for the car market.
Each machine will cost P750,000; will have 5 years economic life with zero salvage value. Both
machines will meet the capacity of the projected demand.
The operating after-tax cash flow per year of each machine is as follows:
1
P100,000
P250,000
Period
Machine A
Machine B
2
P200,000
P250,000
3
P200,000
P250,000
(P750,000)
(P750,000)
P300,000
P250,000
P550,000
P250,000
FM has to decide which of the two machines to buy for the manufacture of ball bearings. The Vice-
president for manufacturing was unsure of which method of ranking alternatives to use.
Use 3 decimal places for the PV factors.
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