Present level of operations

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Reference no: EM13962198

Rank Buildersis considering the replacement of its existing machine, which is obsolete, with either of the following two alternatives:

(i) Machine A which is similar to the existing one or

(ii) Machine B which is more expensive and has much greater capacity.

The cash flow at the present level of operations under the two alternatives are as follows:

Cash Flows

0

1

2

3

4

5

Machine A

(525,000)

45,000

105,000

355,000

295,000

210,000

Machine B

(840,000)

210,000

295,000

355,000

375,000

300,000

Rank's cost of capital is 10%. Help the owner evaluate the alternative machines by calculating the following:

A. Payback

B. Discounted Payback Period

C. Net Present Value

D. MIRR

Which machine would you advise him to buy and why?

Reference no: EM13962198

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