A company is considering investing in a machine (Machine 1) that will save on la
ID: 2549699 • Letter: A
Question
A company is considering investing in a machine (Machine 1) that will save on labor. It is also considering investing in a machine (Machine 2) that will generate revenues. The company can only choose one machine. Based on the information below for each scenario, calculate the present value of the future cash flows. Which machine should the company invest in? Show your work and support your answer with both numbers and words.
Please provide steps.
A company is considering investing in a machine (Machine 1) that will save on labor. It is also considering investing in a machine (Machine 2) that will generate revenues. The company can only choose one machine. Based on the information below for each scenario, calculate the present value of the future cash flows. Which machine should the company invest in? Show your work and support your answer with both numbers and words.
Machine 1 - 4% Rate Machine 2 - 4% Rate Year Cash Flow Year Cash Flow 1 $1,000 1 $4,000 2 $3,000 2 $2,500 3 $3,500 3 $2,250 4 $4,000 4 $2,000Please provide steps.
Explanation / Answer
Machine-1 Year Cash Flow PVF @ 4% Present value 1 1000 0.961538 961.5385 2 3000 0.924556 2773.669 3 3500 0.888996 3111.487 4 4000 0.854804 3419.217 Present values 10266 Machine-2 Year Cash Flow PVF @ 4% Present value 1 4000 0.961538 3846.154 2 2500 0.924556 2311.391 3 2250 0.888996 2000.242 4 2000 0.854804 1709.608 Present values 9867 Machine-1 shall be choosen
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