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

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

Correct Answer:

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