April Romero

Business

30 May, 13:26

Turk Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will produce cash flows as follows:

End of Year Machine A Machine B

1 $ 5,000 $ 1,000

2 4,000 2,000

3 2,000 11,000

Turk 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 Turk purchase?

A) Both machines are acceptable, but B should be selected because it has the greater net present value.

B) Only Machine A is acceptable.

C) Both machines are acceptable, but A should be selected because it has the greater net present value.

D) Neither machine is acceptable.

E) Only Machine B is acceptable.