You have to choose between two merry-go-round engines. Both engines will do the job.

You can buy and install a High Priced model ($25,000) of a machine that requires less maintenance and a Low Priced model ($18,000) that requires more maintenance. The high Priced machine is overhauled after 5 years at a cost of $5,000 but then will run for another 5 years without another overhaul. The Low Priced machine has to be overhauled after 4 years at a cost of $2,500 and every two years thereafter ($2,500 each overhaul). The project involves 10 years of operation. At the end of the 10 years, the high priced machine will have a salvage value of $5,000 and the low priced machine will have no salvage value.

The project will bring in revenue of $7,500 per year. The discount rate is 12%.

A) Calculate the NPV for High price machine and NPV for low price machine

B) At what range of discount rate would the high price machine be preferred over the low price machine?

C) What factor causes the ranking of the projects to change at different discount rates?