Making Norwich Tool's Lathe Investment Decision Norwich Tool, a large machine shop, is considering replacing one of its lathes with either of two new

latheslathe

A or lathe B. Lathe A is a highly automated, computer-controlled lathe; lathe B is a less expensive lathe that uses standard technology. To analyze these alternatives, Mario Jackson, a financial analyst, prepared estimates of the initial investment and incremental (relevant) cash inflows associated with each lathe. These are shown in the following table.

(Click on the icon here

in order to copy the contents of the data table below into a spreadsheet.)

	Lathe A	Lathe B
Initial investment (CF0 )	$660,000	$360,000
Year (t )	Cash inflows (CFt )
1	$128,000	$88,000
2	182,000	120,000
3	166,000	96,000