Rogers Printing Pty Ltd Is Considering Purchasing One of Two

question 2

Multiple Choice

Rogers Printing Pty Ltd is considering purchasing one of two new printing machines to use at its Nowra factory.The Megaprinter 3000 costs $580,000 and is expected to have net cash flows of $43,000 per year for six years at which time it is considered worthless.The Liteprinter 409 costs
$450,000 and is expected to have net cash flows of $32,500 per year for four years at which time it is considered worthless.Both machines perform the same function.The appropriate discount rate for the company is 10%.Based on an NPV analysis what should Rogers Printing do?

• A)The company should buy the Megaprinter 3000.
• B)The company should buy the Liteprinter 409
• C)Both have negative NPVs and therefore both should be rejected.
• D)We do not have any information on revenues and therefore cannot make a decision.

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