Molson Brewery in St. John's needs to replace their bottle washing machine and have three options available, as outlined in the table below: Machine A Machine B Machine C Capital Cost $150,000 $100,000 $250,000 Annual Revenue $50000 $25000 $65000 Annual Cost $5000 $2000 $10000 Salvage Value $10000 $10000 $12000 20 years If the interest rate is 8%, calculate the annual worth of Machine B. Round your Useful Life 12 years 10 years final answer to the nearest dollar.

Molson Brewery in St. John's needs to replace their bottle washing machine and have three options available, as outlined in the table below: Machine A Machine B Machine C Capital Cost $150,000 $100,000 $250,000 Annual Revenue $50000 $25000 $65000 Annual Cost $5000 $2000 $10000 Salvage Value $10000 $10000 $12000 20 years If the interest rate is 8%, calculate the annual worth of Machine B. Round your Useful Life 12 years 10 years final answer to the nearest dollar.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 8%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $186000 $195000 Future Cash Flow Year 1 86000 97000 Year 2 93000 84000 Year 3 83000 86000 Year 4 75000 75000 Year 5 55000 63000 Required:a) Identify which option of equipment should the company accept based on Profitability Index? b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 2 years?

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