Turk Manufacturing Is Considering Purchasing Two Machines $\begin{array}{llr} &\text { A } & \text { B } \\1&\$5,000 &2,000\\2&4,000&2,000\\3&2,000&11,000\end{array}$

question 71

Multiple Choice

Turk Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will produce cash flows as follows: End of
_Year Machine
$\begin{array}{llr} &\text { A } & \text { B } \\1&\$5,000 &2,000\\2&4,000&2,000\\3&2,000&11,000\end{array}$
Turk Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investments. The present value factors of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which machine should Turk purchase?

• A) Only Machine B is acceptable.
• B) Both machines are acceptable, but B should be selected because it has the greater net present value.
• C) Neither machine is acceptable.
• D) Only Machine A is acceptable.
• E) Both machines are acceptable, but A should be selected because it has the greater net present value.

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