Question
A company is considering buying either Machine A or Machine B. Machine Both machines cost $42,453, but Machine A is expected to last 4 years
A company is considering buying either Machine A or Machine B. Machine Both machines cost $42,453, but Machine A is expected to last 4 years and generate cash flows of $19,696 each year, while Machine B is only expected to last 2 years, but generate cash flows of $30,561 each year. If the WACC is 10%, which machine is the best investment? Calculate the RELEVANT NPV of each investment project, then obtain the difference. That is, enter the NPV of buying Machine A - the NPV of buying Machine B. Hint: remember that the NPVs of projects of different lengths are not directly comparable...
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