The Cookies Bakery Company managerial accountant considers the purchase of a new convection oven system. A preferred vendor offers two plausible options, the Tech-Smart convection system (TSCS)and the Perfection Convection Solution Series 3 (PCS3). Both convection systems have a useful life of 12 years. The TSCS requires an initial investment of $250,000 whereas the PCS3 requires an initial investment of $330,000. The energy efficient technology of the TSCS is projected to increase total revenue $38,000 annually while the precise production capability of the PCS3 is projected to increase revenue $52,000 annually. The Managerial accountant plans to invest the cash inflow in an annuity yielding 8%. Compare the net present value of each new system and state which investment is more beneficial to Cookies Bakery Company.
Present Value of $1
Present Value of Annuity of $1

Question

The Cookies Bakery Company managerial accountant considers the purchase of a new convection oven system. A preferred vendor offers two plausible options, the Tech-Smart convection system (TSCS)and the Perfection Convection Solution Series 3 (PCS3). Both convection systems have a useful life of 12 years. The TSCS requires an initial investment of $250,000 whereas the PCS3 requires an initial investment of $330,000. The energy efficient technology of the TSCS is projected to increase total revenue $38,000 annually while the precise production capability of the PCS3 is projected to increase revenue $52,000 annually. The Managerial accountant plans to invest the cash inflow in an annuity yielding 8%. Compare the net present value of each new system and state which investment is more beneficial to Cookies Bakery Company.
Present Value of $1
  Present Value of Annuity of $1

Quizplus · Accepted Answer

The Answer of The Cookies Bakery Company managerial accountant considers the purchase of a new convection oven system. A preferred vendor offers two plausible options, the Tech-Smart convection system (TSCS)and the Perfection Convection Solution Series 3 (PCS3). Both convection systems have a useful life of 12 years. The TSCS requires an initial investment of $250,000 whereas the PCS3 requires an initial investment of $330,000. The energy efficient technology of the TSCS is projected to increase total revenue $38,000 annually while the precise production capability of the PCS3 is projected to increase revenue $52,000 annually. The Managerial accountant plans to invest the cash inflow in an annuity yielding 8%. Compare the net present value of each new system and state which investment is more beneficial to Cookies Bakery Company.
Present Value of $1
  Present Value of Annuity of $1

The Cookies Bakery Company Managerial Accountant Considers the Purchase of a New