Wendy ice cream factory is considering the purchase of a new machine. The machine would cost $400,000 and has an estimated useful life of 10 years with a residual value of 50,000. Management estimates that the new machine will provide net annual cash flow of $60 000. Management also believes that the new machine will save the company money because it is expected to be more reliable than other machine and will reduce downtime. Assume the discount rate is 10%, how much would the reduction in downtime have to be worth, in present value dollars, in order for this investment to be acceptable? (Use Present Value Tables to help calculate your answer) Select one: O a. 13,049 O b. 40,000 O c. 29,000 O d. 12,049

Wendy ice cream factory is considering the purchase of a new machine. The machine would cost $400,000 and has an estimated useful life of 10 years with a residual value of 50,000. Management estimates that the new machine will provide net annual cash flow of $60 000. Management also believes that the new machine will save the company money because it is expected to be more reliable than other machine and will reduce downtime. Assume the discount rate is 10%, how much would the reduction in downtime have to be worth, in present value dollars, in order for this investment to be acceptable? (Use Present Value Tables to help calculate your answer) Select one: O a. 13,049 O b. 40,000 O c. 29,000 O d. 12,049

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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