You have recently been hired by ABC Corporation and your first assignment is to help them decide which of these two options should be pursued. Should you buy a new machine or repair the old one? Apply Capital Budgeting and Time Value of Money concepts. Based on the IRR or NPV, evaluate the decision. Identify quantitative information.

ABC Corporation Repair versus Buy Analysis Assumptions Future Cash Flows Option A: Repair the Machine Year CF-A -50,000 15,500 2 20,100 3 18,900 4 17,100 5 13,700 Option B: Buy a New Machine Year CF-B 1 51,300 2 155,000 3 127,800 4 126,900 5 125,100 -400,000 Analysis Option A-Repair 21% Option B- Buy New 13% IRR NPV Calculations ABC Corporation Discount Rates PV of future CF Option A $61,956.64 $59,059.67 $56,375.00 PV of Future CF- Option B $411,966.48 $390,636.83 $370,937.92 5% 10% 12% 14% 16% 15% 20% $15,000.00 $10,000.00 $5,000.00 $0.00 &($5,000.00 0% 3 ($10,000.00 (515,000.00 ($ 20,000.00 ($ 25,000.00 ($ 30,000.00) ($ 35,000.00) --NPV-Option A -0-NPV-Option B Discount Rates NET PRESENT VALUE 12% 14% 16% NPV - Option A NPV - Option B $11,956.64 $11,966.48 $9,059.67 ($9,363.17) $6,375.00 ($29,062.08)