A
Calculate the NPV of each machine. (Do not round intermediate calculations. Enter your answers in thousand rounded to the nearest whole number.)
Machine A |
Cash
Flow |
PV Factor@12% |
NPV |
C0 |
-107 |
1 |
-107 |
C1 |
117 |
0.892857143 |
104.4643 |
C2 |
128 |
0.797193878 |
102.0408 |
|
|
|
99.5051 |
|
Machine B |
Cash
Flow |
PV Factor@12% |
NPV |
C0 |
-127 |
1 |
-127 |
C1 |
117 |
0.892857143 |
104.4643 |
C2 |
128 |
0.797193878 |
102.0408 |
C3 |
140 |
0.711780248 |
99.64923 |
|
|
|
179.1543 |
B
Calculate the equivalent annual cash flow from each machine. (Do not round intermediate calculations.Round “PV Factor” to 3 decimal places. Enter your answers in thousand rounded to the nearest whole number.)
NPv of the project A |
99.50510204 |
Life of Project A |
2 year |
EACF = C = r (NPV) / 1 – (1 + r)-n |
58.8 |
NPv of the project B |
179.1543367 |
Life of Project B |
3 year |
EACF = C = r (NPV) / 1 – (1 + r)-n |
74.59 |
C
Which machine should you buy? |
Answer : Company should by Machine B