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3. The Omega Company Ltd. is considering the purchase of a new machine. Two alternative machines X and Y have been suggested, each costing $40000.
3. The Omega Company Ltd. is considering the purchase of a new machine. Two alternative machines X and Y have been suggested, each costing $40000. Company's cost of capital is 10% Earnings after taxation expected to be as follows: Year 1 Cash flows $ Machine A Machine B 4000 $ 12000 12000 16000 16000 20000 2 4 24000 12000 5 16000 8000 Suggest which machine should be preferred based on NPV method. (9 marks)
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