Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system
for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two; the B14 Model and the F54 Model. Financial data about the two choices follows: (For B14 Model, the present value for this scenario is 0.351 and the present value of annuity for this scenario is 4.639. For the F54 Model, the present value for this scenario is 0.467 and the present value of annuity for this scenario is 5.335)
Investment: B14 - $320,000; F54 - $240,000
Useful life (years): B14 - 8; F54 - 8
Estimated annual net cash inflows for useful life: B14 - $70,000; F54 - $35,000
Residual value: B14 - $30,000; F54 - $10,000
Depreciation method: B14 - Straight-line; F54 - Straight-line
Required rate of return: B14 - 14%; F54 - 10%
What is the net present value of the B14 Model?
A) $15,260 positive
B) $48,605 negative
C) $335,260 positive
D) $5,800 negative
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