Which if any machine should be purchased

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Reference no: EM13954550

Stainless Shine, a chain of dry- cleaning stores, has the opportunity to invest in one of two dry cleaning machines; Machine A has a four-year expected life and a cost of $50,000. It will cost an additional $6500 to have the machine delivered and installed, and the expected residual value at the end of four years is $4,000. Machine B has a four-year expected life and a cost of $80,000. It will cost an additional $7,000 to have the machine delivered and installed, and the expected residual value at the end of four years is $6,000. Stainless has a required rate of return of 14 percent. Additional cash flows related to the machines are as follows:

2054_259-B-M-A-C-B-D (490).png

Required:

a. Ignoring taxes, determine the net present value of investing in machine A.

b. Ignoring taxes, determine the net present value of investing in machine 8. c Which, if any, machine should be purchased? 

Reference no: EM13954550

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