Reference no: EM132479494

Point 1: Futurist Enterprises is considering buying one of two possible available machines as part of its proposed product expansion. Machine no. 1 would cost $150 000 and is expected to earn annual net cash inflows of $50 000, $52 000, $55 000, $38 900 and $36 500 before it wears out sufficiently to be unreliable and will be sold for an estimated $20 200.

Point 2: Machine No.2 would cost $115 000 and is expected to earn annual net cash inflows of $40 000, $42 000, $45 000, $32 900 and $32 500 before it wears out sufficiently to be unreliable and will be sold for an estimated $10 100

Question 1: What advice would you give management if the required payback period was two years?