FreST Water Solutions Pty Ltyis considering investing in a new testing device. It has two options: Option A would have a lower initial cost but would require significant expenditure for rebuilding after 4 years. Since the option B machine is of initial higher quality, it is expected to have a residual value at the end of its useful life. The following estimates were provided:

The Cost of capital is 9%

Calculate the net present value (NPV) for each option.

Option A Option B Initial cost $90,000 $215,000 Annual cash inflows $180,000 $140,000 Annual cash outflows $160,000 $108,000 Cost to rebuild (end of year 4) $18,000 O Residual value 0 $42,000 Estimated useful life 8 years 10 years