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Jupiter Corp. is choosing between two different capital investment proposals. Machine A has a useful life of 4 years, and Machine B has a useful

Jupiter Corp. is choosing between two different capital investment proposals. Machine A has a useful life of 4 years, and Machine B has a useful life of 6 years. Each proposal requires an initial investment of $200000, and the company desires a rate of return of 10%. Although Machine B has a useful life of 6 years, it could be sold at the end of 4 years for $35000.

Year present Value of $1 at 10%
1 0.909
2 0.826
3 0.751
4 0.683
5 0.621
6 0.513

Machine A will generate net cash flow of $70000 in each of the four years. Machine B will geberate $80000 in year 1, $70000 in year 2, $60000 in year 3, and 40000 per year for the remaining 3 years of its useful life.

Which of the following statement portrays the most accurate analysis between the two proposals?

a. Mars should invest in Machine A becuase the net present value of Machine A after 4 years is higher than the net present value of Machine B after 4 years.

b. Mars should invest in Machine B becuase the net present value of Machine A after 4 years is lower than the net present value of Machine B after 6 years.

c. Mars should invest in Machine B becuase the net present value of Machine A after 4 years is lower than the net present value of Machine B after 4 years.

d. Mars should invest in Machine A becuase the net present value of Machine A after 4 years is higher than the net present value of Machine B after 6 years.

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