Reference no: EM132952849

Grenada Company is contemplating the acquisition of a machine that costs $55,000 and promises to reduce annual cash operating costs by $10,000 over each of the next 7 years.

PV of $1 (i = 12%; n = 7):0.452PV of a series of $1 cash flows (i = 12%, n = 7):4.564

Problem 1: Which of the following is a proper way to evaluate this investment if the company desires a 12% return on all investments?

Multiple Choice

Option 1: $55,000 versus - $10,000 × 4.564.

Option 2: $55,000 versus - $70,000 × 4.564.

Option 3: $55,000 versus - $70,000 × 0.452.

Option 4: $55,000 × 0.893 versus - $10,000 × 4.564.

Option 5: $55,000 versus - $10,000 × 7.