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Miles Inc is considering the purchase of a new machine for $600000 that has an estimated useful life of 5 years and no salvage value The machine will generate net annual cash flows of

Miles, Inc. is considering the purchase of a new machine for $600,000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $105,000. It is believed that the new machine will also reduce downtime because of its reliability. Assume the discount is 8%. In order to make the project acceptable, the reduction in downtime must be worth

Year                     Present value of 1 at 8%                   Present Value of Annuity 1 at 8%

1                                       .926                                                    .926

2                                      .857                                                   1.783

3                                     .794                                                    2.577

4                                     .735                                                   3.312

5                                     .681                                                   3.993

A)   $45,263 per year      B)   $18,264 per year      C)   $49,662 per year      D)   $23,958 per year

May 21 2020 View more View Less

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