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Define present value computations

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Reference no: EM13503440

Present Value Computations

Two machines - Machine M and Machine P - are being considered in a replacement decision. Both machines have about the same purchase price and an estimated ten-year life. The company uses a 12 percent minimum rate of return as its acceptance-rejection standard. The estimated net cash inflows for each machine follow.

Year Machine M
Machine P
1 $12,000
$17,500
2 12,000
17,500
3 14,000
17,500
4 19,000
17,500
5 20,000
17,500
6 22,000
17,500
7 23,000
17,500
8 24,000
17,500
9 25,000
17,500
10 20,000
17,500
Residual value 14,000
12,000

 

1. Compute the present value of future cash flows for each machine, using Table 1 and Table 2.


 Total Present Value
Machine M $
Machine P $ 

 

Reference no: EM13503440

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