Rollerblade, a Maker of Skating Gear, Is Evaluating Two Alternative

question 5

Multiple Choice

Rollerblade, a maker of skating gear, is evaluating two alternative presses. Press A costs $88,000, has a 4-year life, and is expected to generate annual cash inflows of $30,100 in each of the 4 years. Press B costs $122,000, has an 8-year life, and is expected to generate annual cash inflows of $24,600 in each of 8 years. The cost of replacement for A is $96,000, and the replacement press will generate cash inflows of $30,100 for another 4 years. Rollerblade uses a 12% cost of capital. Which press should be chosen?

• A) Press A
• B) Press B
• C) Both Presses A and B
• D) Neither Press A nor B

---

Definitions:

Apart

Separated by a distance or gap, or considered as separate or distinct entities.

Toward

A direction or orientation leading closer to a specific location or object.

Near

Located at a short distance in space or time.

Circum-

A prefix indicating 'around' or 'about', used in medical and general terminology.