171) (Present value tables are needed.) Georgia Peach Farms is upgrading its fruit...

171) (Present value tables are needed.) Georgia Peach Farms is upgrading its fruit washing/separating machine. Georgia has narrowed the decision down to two machines: Machine A and Machine B. Pertinent information about each machine include :

Machine AMachine B

Investment$450,000$650,000

Useful life (years)1010

Estimated annual net cash inflows for useful life$75,000$120,000

Residual value$25,000$35,000

Depreciation methodstraight-linestraight-line

Required rate of return10%12%

Required:

a.Calculate the net present value of Machine A.

b.Calculate the net present value of Machine B.

c.Using the net present value method, which machine should Georgia select if it can select only one investment?

172) (Present value tables are needed.) Shaker Investments, a private investment holding company, is searching for a new investment opportunity. Shaker Investments has identified two potential investment opportunities: an upstart fast food chain and a growing organic grocery chain. Information for each investment follows:

Fast FoodOrganic Grocery

ChainChain

Investment$975,000$1,500,000

Useful life (years)1515

Estimated annual net cash inflows for useful life$120,000$210,000

Residual value$50,000$100,000

Depreciation methodstraight-linestraight-line

Required rate of return8%10%

Required:

a.Calculate the net present value of the Fast Food Chain.

b.Calculate the net present value of the Organic Grocery Chain.

c.Using the net present value method, which investment should Shaker select if it can select only one investment?