Question
Consider the following two machines a company can purchase. The following table provides the costs of the machines and the annual cash flows obtained from
Consider the following two machines a company can purchase. The following table provides the costs of the machines and the annual cash flows obtained from the machines over their lifetimes.
Initial Cost | Cash Inflows per year | Years of Service | |
Machine A | $18,000 | $9,000 | 6 |
Machine B | $9,000 | $14,000 | 5 |
The discount rate is 1%.
What is the net present value for each machine?
Machine A = Correct response: 34,159.292
Machine B = Correct response: 58,948.042
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This question has 3 parts (i.e., you will need to click "verify" 3 times)
Given that Machine A has an NPV of $34,159.29 and Machine B has an NPV of $58,948.04, what are the equivalent annual cash flows for each machine?
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