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An apparel company is considering replacing the existing machine that produce their flagship suits. They will pick one of two machines: A and B. Machine
An apparel company is considering replacing the existing machine that produce their flagship suits. They will pick one of two machines: A and B. Machine A costs $12,000 initially(at t=0)but will provide a net cash flow (= revenue cost) of $6,000 per year for next3years(year 1-3). Machine B costs $20,000 initially (at t=0) but will provide a net cash flow of $8,000 per year for next 5years(year 1-5). Determine which machine the company should choose and explain why. Assume a discount rate(opportunity cost of capital)of 10%for both machine.
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