Pave-It, Inc. is trying to decide whether to purchase a new paving machine, a new mixer or to upgrade the cement finishing machine. All of the alternatives are viewed as having the same ten year project life and none are expected to have any salvage value. However, different project prices are applicable to each and each has a different expected stream of annual net cash inflows. The firm's managers believe that a discount rate of 12 percent is appropriate for evaluating the alternatives. Data are as follows:
Annual
Project Price Net Inflows

After examining the project prices, management finds it has sufficient capital budget to complete two of them. Which two projects will be undertaken and what is their net present value?
A) Paving Machine = 3251, Mixer = 5600.80
B) Paving Machine = 3251, Cement Finisher = 1950.60
C) Mixer = 5600.80, Cement Finisher = 5910.60
D) Mixer = 3251, Paving Machine = 1950.60
E) Cement Finisher = 5600.80, Paving Machine =1950

Question

Pave-It, Inc. is trying to decide whether to purchase a new paving machine, a new mixer or to upgrade the cement finishing machine. All of the alternatives are viewed as having the same ten year project life and none are expected to have any salvage value. However, different project prices are applicable to each and each has a different expected stream of annual net cash inflows. The firm's managers believe that a discount rate of 12 percent is appropriate for evaluating the alternatives. Data are as follows:
Annual
Project Price Net Inflows

After examining the project prices, management finds it has sufficient capital budget to complete two of them. Which two projects will be undertaken and what is their net present value?
A) Paving Machine = 3251, Mixer = 5600.80 
B) Paving Machine = 3251, Cement Finisher = 1950.60 
C) Mixer = 5600.80, Cement Finisher = 5910.60 
D) Mixer = 3251, Paving Machine = 1950.60 
E) Cement Finisher = 5600.80, Paving Machine =1950

Quizplus · Accepted Answer

The Answer of Pave-It, Inc. is trying to decide whether to purchase a new paving machine, a new mixer or to upgrade the cement finishing machine. All of the alternatives are viewed as having the same ten year project life and none are expected to have any salvage value. However, different project prices are applicable to each and each has a different expected stream of annual net cash inflows. The firm's managers believe that a discount rate of 12 percent is appropriate for evaluating the alternatives. Data are as follows:
Annual
Project Price Net Inflows

After examining the project prices, management finds it has sufficient capital budget to complete two of them. Which two projects will be undertaken and what is their net present value?
A) Paving Machine = 3251, Mixer = 5600.80 
B) Paving Machine = 3251, Cement Finisher = 1950.60 
C) Mixer = 5600.80, Cement Finisher = 5910.60 
D) Mixer = 3251, Paving Machine = 1950.60 
E) Cement Finisher = 5600.80, Paving Machine =1950