Question 1: Evaluate Machine A and Machine B.
Assume:
A. The life of each machine is 3 years
B. The company thinks it knows how to make 14% on investments no more risky than this one.
Question 2. Determine, via Present Value Method, which machine should be recommended. Explain your decision. What assumptions are you making about the machines? What assumptions are you making in your methodology?
Question 3. Please explain in details how/what/why you did what you did in this exercise and list the solutions which you have came up with. In other words, provide a written summary of this exercise so that I understand exactly how you did it.
| |
|
Machine A |
Machine B |
| Original Cost |
|
$39,000 |
$32,500 |
| Labor per Year |
|
3,000 |
6,000 |
| Floor Space per Year |
|
390 |
450 |
| Energy per Year |
|
3,490 |
2,400 |
| Maintenance per Year |
|
2,000 |
4,000 |
| Total Annual Cost |
|
8,880 |
12,850 |
| Salvage Value |
|
2,500 |
3,000 |