Question
Believeland Shirt Inc. (BSI) is looking at different machines to produce its new collection of shirts. They can replace an old machine that is getting
Believeland Shirt Inc. (BSI) is looking at different machines to produce its new collection of shirts. They can replace an old machine that is getting unreliable and has shown increasingly higher rates of errors. The machines have different costs and cash flows. Machine A has initial costs of $8,200, installation costs of $2,400 and will cause adaptation costs of $1,800. The cash flows for A are $5,500$4,000; 4,400 and $2,500 in each period 1-4 respectivelyInvestment A has a salvage value of $500. Machine B has initial costs of $6,800installation costs of $3,000 and will cause adaptation costs of $1,400. The cash flows for B are $5,600$3,300$3,700 and $2,800 in each period 1-4 respectively The rate of return used for all investments is 16% What is the NPV of Machine A (round the NPV mathematically to the next full Dollar?
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