Miles, Inc A)$23,958 Per Year

question 148

Multiple Choice

Miles, Inc.is considering the purchase of a new machine for $600,000 that has an estimated useful life of 5 years and no salvage value.The machine will generate net annual cash flows of $105,000.It is believed that the new machine will reduce downtime because of its reliability.Assume the discount rate is 8%.In order to make the project acceptable, the reduction in downtime must be worth $\begin{array}{rrr}& \text { Present Value } & \text { PV of an Annuity } \\\text { Year } & \text { of } 1 \text { at } 8 \% & \text { of } 1 \text { at } 8 \%\\\hline1 & .926 & .926 \\2 & .857 & 1.783 \\3 & .794 & 2.577 \\4 & .735 & 3.312 \\5 & .681 & 3.993\end{array}$

• A)$23,958 per year.
• B)$49,662 per year.
• C)$18,264 per year.
• D)$45,263 per year.

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