Ginger Company Is Contemplating Acquiring One of the Following Machines

question 146

Essay

Ginger Company is contemplating acquiring one of the following machines: $\begin{array}{lll}&\text { M achine } A&\text { M achine } B\\\text { Initial investment } & \$ 180,000 & \$ 225,000 \\\text { Additional annual: } & & \\\text { R evenues } & \$ 90,000 & \$ 150,000 \\\text { Cash expenses } & \$ 25,000 & \$ 85,000\\\text { Terminal salvage value } & -0- & -0- \\\text { Estimated useful life }& 5 \text { years } & 5 \text { years } \\\text { Minimum desired rate } \\\text { of return }& 14 \% & 14 \%\end{array}$ Assume straight- line depreciation and ignore income taxes. Required:
Calculate the net present value for both machines and choose the best alternative.

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Definitions:

Delivery

In the context of services and goods, it refers to the process of transporting products from a source to a predefined destination.

Birth Process

The series of physiological and mechanical actions through which a fetus is expelled from the uterus and becomes a neonate.

Shortest Duration

Referring to the least amount of time required for completing a task or occurring an event.

Third Stage

Refers to a phase or level in a series of processes or developments, which implies progression or development from two preceding stages.