Alpha Manufacturing is evaluating two new machinery investments. The required rate of return is 8%. Year Machine
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Question:
Alpha Manufacturing is evaluating two new machinery investments. The required rate of return is 8%.
Year | Machine A | Machine B |
0 | $(60,000) | $(75,000) |
1 | $15,000 | $18,000 |
2 | $18,000 | $22,000 |
3 | $22,000 | $28,000 |
4 | $25,000 | $32,000 |
a. Calculate the payback period for both projects. Which project is preferred based on the payback period?
b. Determine the net present value for each project. Which project should be selected based on the net present value?
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