Question
You have two alternatives for the replacement of the old machine in your family-owned business. Machine X & Y meet the same efficiency level and
You have two alternatives for the replacement of the old machine in your family-owned business. Machine X & Y meet the same efficiency level and perform the same activities but generate different cash flows. The cost is $105,000 for each machine. Machine X has a useful life of 5 years and Y has 3 years useful life. The discount rate is 12%. Using the after-tax costs, calculate NPV for each project and select the best alternative.
Year Alternative X Alternative Y
0 (105,000) (105,000)
1 (15,000) (8,000)
2 (15,000) (8,000)
3 (15,000) (8,000)
4 (15,000) -
5 (15,000) -
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