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Repeatable methods of producing a new product

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1. Joe's Technology must choose between two repeatable methods of producing a new product. The initial costs and year-end cash benefits are as follows:

Year                                             0                      1                              2                                3                               4                               5

Method M                  -$1,500,000                 600,000                     750,000                      550,000                      200,000    

Method N                  -$2,500,000                1,200,000                  950,000                      700,000                      400,000                      300,000

Assume all cash flows occur at year-end and the company's required return is 6.75 percent.

Please compute the net present value ______________ and the equivalent annuity ________________ for Method M

Please compute the net present value ______________ and the equivalent annuity ________________ for Method N

Which production method should be used? _______________

Reference no: EM131736140

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