(Ignore income taxes in this problem.)Cannula Vending Corporation is expanding operations and needs to purchase additional vending machines.There are currently two companies, Viscera, Inc.and Gullet International, that produce and sell machines that will do the job.Information related to the specifications of each company's machine are as follows: Cannula's discount rate is 18%.Cannula uses the straight-line method of depreciation.Using net present value analysis, which company's machine should Cannula purchase and what is the approximate difference between the net present values of the competing company's machines?

Question

(Ignore income taxes in this problem.)Cannula Vending Corporation is expanding operations and needs to purchase additional vending machines.There are currently two companies, Viscera, Inc.and Gullet International, that produce and sell machines that will do the job.Information related to the specifications of each company's machine are as follows:   Cannula's discount rate is 18%.Cannula uses the straight-line method of depreciation.Using net present value analysis, which company's machine should Cannula purchase and what is the approximate difference between the net present values of the competing company's machines?

Quizplus · Accepted Answer

11ea7998_5c3d_4358_911b_2b6d85c186ad_TB2627_00_TB2627_00 11ea7998_5c3d_6a69_911b_09b8c9f7282e_TB2627_00_TB2627_00 Viscera is the least costly alternative.
The difference in net present value = $(29,634)- $(31,196)= $1,562

(Ignore Income Taxes in This Problem