Question

The Thunderbird Winery must replace its present grape pressing equipment. Two alternatives are under consideration, the Quick-Skwish and the Stomp-Master. The Thunderbird Winery has a Minimum Attractive Rate of Return of 4%. Which machine should be chosen? (use NPW Method and draw a cash flow diagram)

	Quick-Skwish	Stomp-Master
Initial Cost	$250,000	$400,000
1st Year Operating Expense	$ 18,000	$ 12,500
Operating Expense Gradient (begins in year 2)	$2000	$1,000
Salvage Value	$ 25,000	$ 40,000
Useful Life (years)	5	10

Answer 1