Saxon Manufacturing Is Considering Purchasing Two Machines Saxon Manufacturing Uses the Net Present Value Method to Make

question 126

Multiple Choice

Saxon Manufacturing is considering purchasing two machines.Each machine costs $9,000 and will produce cash flows as follows:
$$\begin{array} { c c } \begin{array}{l}\text {End of}\\ \text {Year}\\1\\2\\3\end{array}\begin{array} { }& \text { Machine } \\&\begin{array} { }&\text { A } & \text { B } \\&\$ 5,000 & \$ 1,000 \\&4,000 & 2,000 \\&2,000 & 11,000\end{array}\end{array}\end{array}$$
Saxon 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 Saxon purchase?

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

---

Definitions:

Analytics

The systemic computational analysis of data or statistics used to discover patterns and interpret information to support decision-making.

Analytics

The systematic computational analysis of data or statistics to identify patterns, trends, or insights.

Big Data

Large and complex data sets that traditional data processing software are inadequate to deal with, which require advanced techniques for analysis, capture, search, and storage.

Evidence-Based Management

The practice of making managerial decisions based on the best available scientific evidence, rather than solely on intuition or personal experience.