Velocity Tire Company's managerial accountant assesses the net present value of two different types of tread repair machines in order to ascertain the better investment option. The Retreadit-2000 will require an investment of $320,000 while the Econ-4760 will require an investment of $280,000. Each piece of equipment has a useful life of 10 years with no residual value. The Retreadit-2000 annual net cash inflow has a static value of $72,000 annually whereas the Econ-4760 has a static cash inflow predicted at $49,500. The revenue generated by the chosen product will be invested in an annuity at 12%, compute the net present value of the two pieces of equipment and state which will be the better investment according to their respective NPVs.
Present Value of $1
Present Value of Annuity of $1

Question

Velocity Tire Company's managerial accountant assesses the net present value of two different types of tread repair machines in order to ascertain the better investment option. The Retreadit-2000 will require an investment of $320,000 while the Econ-4760 will require an investment of $280,000. Each piece of equipment has a useful life of 10 years with no residual value. The Retreadit-2000 annual net cash inflow has a static value of $72,000 annually whereas the Econ-4760 has a static cash inflow predicted at $49,500. The revenue generated by the chosen product will be invested in an annuity at 12%, compute the net present value of the two pieces of equipment and state which will be the better investment according to their respective NPVs.
Present Value of $1
  Present Value of Annuity of $1

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The Answer of Velocity Tire Company's managerial accountant assesses the net present value of two different types of tread repair machines in order to ascertain the better investment option. The Retreadit-2000 will require an investment of $320,000 while the Econ-4760 will require an investment of $280,000. Each piece of equipment has a useful life of 10 years with no residual value. The Retreadit-2000 annual net cash inflow has a static value of $72,000 annually whereas the Econ-4760 has a static cash inflow predicted at $49,500. The revenue generated by the chosen product will be invested in an annuity at 12%, compute the net present value of the two pieces of equipment and state which will be the better investment according to their respective NPVs.
Present Value of $1
  Present Value of Annuity of $1

Velocity Tire Company's Managerial Accountant Assesses the Net Present Value