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Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table: Machine

Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table:

Machine A

Machine B

Original Cost

$10,000

$20,000

Labor per year

$2,400

$4,400

Maintenance per year

$4,600

$1,200

Salvage value

$1,600

$7,200

He is told to assume that:

1. The life of each machine is 3 years.

2. The company thinks it knows how to make 8% on investments no more risky than this one.

3. Labor and maintenance are paid at the end of the year.

The NPV for Machine A equals=

(round your response to the nearest whole number and include a minus sign if necessary).

The NPV for Machine B equals=

(round your response to the nearest whole number and include a minus sign if necessary).

Using the net present value as the basis of comparing the machines, Tim should recommend???

(Machine A or Machine B)

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