The production department is proposing the purchase of an automatic insertion ma

Question

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and have asked the accountant to analyze them to determine which of the proposals (if any) meet or exceed the company's policy of a minimum desired rate of return of 10% using the net present value method. Each of the assets has an estimated useful life of 10 years. The accountant has Identified the following data: Which of the investments are acceptable? Machines B & C Machines A & C Machine B only Machine A only

Explanation / Answer

Machine A & C are accepatble.

Beacause both rate of return is 10 % or more than 10%

A =305000/300000= 10.17%

C = 300000/300000= 10%

B =295000/300000= 9.833%

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