Mountain Fresh Water Company Is Considering Two Mutually Exclusive Machines

question 87

Multiple Choice

Mountain Fresh Water Company is considering two mutually exclusive machines.Machine A has an up-front cost of $100,000 (CF₀ = -100,000) ,and it produces positive after-tax cash inflows of $40,000 a year at the end of each of the next six years.Machine B has an up-front cost of $50,000(CF₀ = ?50,000) ,and it produces after-tax cash inflows of $30,000 a year at the end of the next three years.The company's cost of capital is 10.5%.Based on the equivalent annual annuity,which machine will be chosen?

• A)Afor$71,687
• B)A for $16,702
• C)B for $23,954
• D)B for $9,718

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Definitions:

Workdays

The days on which an individual is scheduled to work, typically referring to the standard Monday through Friday schedule for full-time employment.

Developmentalists

Researchers who specialize in the study of how people grow and change over the course of their life, focusing on developmental psychology.

Systematic Observation

A methodical approach to data collection where the observer follows a strict set of guidelines to record behaviors, events, or other phenomena, often used in research to ensure reliability and validity.

Wilhelm Preyer

A German scientist recognized for his contributions to the study of child development and for being a pioneer in the field of developmental psychology.