Question
Mr. Money Bags owns a Coffee Company, the plant manager wants to buy a new machine. He asks you to evaluate it for him and
Mr. Money Bags owns a Coffee Company, the plant manager wants to buy a new machine. He asks you to evaluate it for him and make a recommendation. He is a stickler for details he needs to see everything, but his eyesight is not good, so your report must be very clear.He gives the following informationThey are considering two machines. Machine A costs $450,000 and Machine B $650,000. They will both last 7 years. Machine A will produce $171,924 per year for 7 years and Machine B will produce $276,352 per year. The companies cost of capital is 10%. Compute the simple payback, net present value and internal rate of return for each machine and then make a recommendation as to what machine is best. Assume no tax impact.
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