Question
Virginia Tech Printing LLC is considering the purchase of a new printing machine. Specific information for both are as follows: i. Machine A - Cost
Virginia Tech Printing LLC is considering the purchase of a new printing machine. Specific information for both are as follows: i. Machine A - Cost is $50,000. Functional Life is 9 years. There is no salvage value. The finance division is expecting cash flows of $10,000 per year. The required discount rate is 20% ii. Machine B Cost is $75,000. The functional life is 7 years but you anticipate a salvage value of $10,000 at the end of the period. Annual cash flow is expected to be $35,000. Again, the discount rate is 20% iii. Calculate NPV and IRR for Machine B and Machine A iv. Which machine would you recommend buying and why?
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