Greencut lawnmowers is thinking about buying a new piece of machinery that costs $185,000. after its estimated useful life of 6 years, the machine will have no salvage value. greencut’s management believes the new machine will provide net annual cash flows of $38,500. management also thinks the machine will save the firm extra money by reducing its amount of manufacturing errors. if the discount rate is 9%, how much must the reduction in manufacturing errors be worth in order for the project to be acceptable?
year pv of 1 at 9% present value of an annuity of 1 at 9%
6 0.5963 4.4859
a) about $2,740 per year
b) about $3,690 per year
c) about $10,250 per year
d) about $8,720 per year