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Product A Product B Initial Investment: Cost of Equipment (zero salvage value) $170,000 $380,000 Annual Revenues and costs: Sales Revenue: $250,000 $350,000 Variable Expenses: $120,000

Product A

Product B

Initial Investment:

Cost of Equipment (zero salvage value)

$170,000

$380,000

Annual Revenues and costs:

Sales Revenue:

$250,000

$350,000

Variable Expenses:

$120,000

$170,000

Depreciation Expense:

$34,000

$76,000

Fixed out-of-pocket operating costs:

$70,000

$50,000

Item

Periods

Amount of Cash Flows

Product A:

Purchase of equipment

$170,000

Net annual cash inflows (above)

$60,000

Net Present Value:

Product B:

Purchase of equipment

$380,000

Net annual cash inflows (above)

$130,000

Net Present Value:

What would the amount of cash flows be?

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