(NPV) A company has the choice between two different types of machines. Machine A costs...
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Finance
(NPV) A company has the choice between two different types of machines. Machine A costs less, but it also has a shorter life expectancy of two years. B costs more but lasts longer for four years. The expected cash flows after taxes for the two different types are as follows:
| Machine | 0 | 1 | 2 | 3 | 4 |
| A | (10,000) | 8,000 | 8,000 |
|
|
| B | (12,000) | 5,000 | 5,000 | 5,000 | 5,000 |
The cost of money of the firm is 10%. Analyze the two options and advise the company which one is better.
show how to solve with formula and with financial calculator
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