The equipment below is required for your business. Assume each will be replaced as it...
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The equipment below is required for your business. Assume each will be replaced as it wears out. The required return is 15%. Ignore taxes. Machine A Machine B Initial cost $200,000 $300,000 Operating Cost/year 15,000 17,500 Life 8 yrs 10 yrs Which machine should you buy and why? a. Machine B because it effectively costs less to operate each year. b. Machine A because it has a higher NPV. c. Neither, since the NPV for both is negative. d. Machine A because it effectively costs less to operate each year. e. Machine B because it has a higher NPV.
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