Posted: February 20th, 2022
Dwight Donovan, the president of Perez Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $116,000 and for Project B are $45,000. The annual expected cash inflows are $35,806 for Project A and $14,816 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Perez Enterprises’ desired rate of return is 8 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)
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