Homework Answers
ANSWER
As per the given question,
Since pumps need to be used for 10-year's service life, we will use market value on Year 10 as cash inflow.
2. Present Worth:
NPV = [Cash inflow / (1+r)n] – Initial investment
Pump 1:
NPV = [$12,000/1.0510] - $60,000 = -$52,633.04
Pump 2:
NPV = [$15,000/1.0510] - $75,000 = -$65,791.30
Based on present worth, Pump 1 should be purchased.
THANK YOU FOR THE QUESTION....KINDLY RATE...IT HELPS ME A LOT
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