Suppose that ABC Ltd is considering purchasing one of three new processing machines. Either machine would make it possible for the company to produce its products more efficiently. Estimates regarding each machine are provided below: Machine A $79,000 7 years Machine B $110,000 8 years Machine C Original cost Estimated life Salvage value $244,000 10 years $30,000 $58,500 $18,500 Nil Nil $ 60,000 $ 35,000 Estimated annual cash inflows $30,000 Estimated annual cash outflows $ 7,000 If the projects cannot be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital?
Suppose that ABC Ltd is considering purchasing one of three new processing machines. Either machine would make it possible for the company to produce its products more efficiently. Estimates regarding each machine are provided below: Machine A $79,000 7 years Machine B $110,000 8 years Machine C Original cost Estimated life Salvage value $244,000 10 years $30,000 $58,500 $18,500 Nil Nil $ 60,000 $ 35,000 Estimated annual cash inflows $30,000 Estimated annual cash outflows $ 7,000 If the projects cannot be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 2TP: Austins cell phone manufacturer wants to upgrade their product mix to encompass an exciting new...
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