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Joan’s Juice Company is considering purchasing three different
production machines. At the end of 10 years the company is able to sell the machinery back to the
manufacturer, (value is included in the 10th year’s cash flow).
Machine | Cost | Yr
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | Orange
Press | $18000 | 450 | 750 | 1200 | 1400 | 1800 | 1600 | 1600 | 1400 | 1400 | 10500 | Beet
Pulper | $10700 | 500 | 750 | 750 | 900 | 600 | 900 | 1000 | 1000 | 800 | 5000 | Carrot Puree
| $8150 | 750 | 900 | 1000 | 1000 | 1250 | 1250 | 1350 | 1350 | 1500 | 2500 | | | | | | | | | | | | |
As the CFO at Joan’s Juice Company, you must provide Joan with your
recommendations on which investment or investments the company should make.
· What is
the return on investment for each machine?
· How does
the timeliness and level of cash flows from each machine affect the PV of cash
flows?
· What criteria will you establish to determine
which investment(s) are most appropriate for the company?
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