Miles, Inc. is considering the purchase of a new machine for $600,000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $105,000. It is believed that the new machine will also reduce downtime because of its reliability. Assume the discount is 8%. In order to make the project acceptable, the reduction in downtime must be worth
YearPresent value of 1 at 8%Present Value of Annuity 1 at 8%
1.926.926
2.8571.783
3.7942.577
4.7353.312
5.6813.993
A) $45,263 per year
B) $18,264 per year
C) $49,662 per year
D) $23,958 per year
Answers: 3
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