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I got this question wrong, how do I work it out? Question 5 0/8 pts Managers at Acme Doohickey Co. are considering two projects. Project
I got this question wrong, how do I work it out?
Question 5 0/8 pts Managers at Acme Doohickey Co. are considering two projects. Project A: purchase and operation of a new machine, called the Starpunch, for manufacturing Acme doohickeys. The life of this project is three years. Project B: purchase and operation of a new machine, called the Sunspot, for manufacturing Acme doohickeys. The life of this project is two years. The machines have identical capacity and produce the same doohickey. The company only has floor space in its machinists' shop for one machine. Assume that the appropriate discount rate in 7%, compounded annually. Identify which project, if either, managers should accept, and explain why. Table: Expected Cash Flows for Projects A and B A Year C revenue A costs ANCF BNCF revenue B costs ($29,000) ($23,000) 1 $20,000 ($9,000) $20,000 ($7,000) 2 $20,000 ($8,000) $20,000 ($6,000) 3 $20,000 ($8,000) Note: the table lists net revenue and net cost for each project and each year. But the table is incomplete; you will need to calculate the Net Cash Flows. ed Accept Project A. Its NPV > 0. Also, when both of the project lifetimes are correctly extended to 6 years, the Project A NPV = $1,557 which is greater than the Project BNPV = $1,378. Accept Project B. Its NPV > 0. In addition, its cost in each year is less than the corresponding cost for Project A. Accept Project B.Its NPV > 0. Also, when both of the project lifetimes are correctly extended to 6 years, the Project BNPV = $4,624 which is greater than the Project A NPV = $3,923. Reject both projects. When both of the project lifetimes are correctly extended to 6 years, the NPV for each project is negative. wer Accept Project B. Its NPV > 0. Also, when both of the project lifetimes are correctly extended to 6 years, the Project BNPV = $3,632 which is greater than the Project A NPV = $2,828Step by Step Solution
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