Saxon Manufacturing Is Considering Purchasing Two Machines Saxon Manufacturing Uses the Net Present Value Method to Make
Saxon Manufacturing is considering purchasing two machines.Each machine costs $9,000 and will produce cash flows as follows:
End of Machine
Year A B
Saxon Manufacturing uses the net present value method to make the decision,and it requires a 15% annual return on its investments.The present value factors of 1 at 15% are:
1 year,0.8696; 2 years,0.7561; 3 years,0.6575.Which machine should Saxon purchase?
A) Only Machine A is acceptable.
B) Only Machine B is acceptable.
C) Both machines are acceptable, but A should be selected because it has the greater net present value.
D) Both machines are acceptable, but B should be selected because it has the greater net present value.
E) Neither machine is acceptable.
Correct Answer:
Verified
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