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Selecting the best investment proposal

Slot Precision Services, Inc. has five alternative broaching machines/processes that are being studied. Only one will be chosen and the data is shown below. Recommend the choice for management that uses the internal rate of return criterion. Compare this with the decision with that of a Present Worth criterion. Submit your solution in a spreadsheet.

Time Horizon 5 years

Alternatives Investment in year 0 Annual Cash Flow Salvage value in last year
1 $50,000 $18,000 $0
2 $250,000 $85,000 $75,000
3 $350,000 $105,000 $125,000
4 $600,000 $150,000 $400,000
5 $800,000 $165,000 $600,000

Solution Summary

The solution depicts the steps to calculate the NPV and IRR parameters for the given proposals. It also selects the best proposal.