A construction company is considering two options to purchase a new piece of equipment to improve its operations. The first option is to purchase a new piece of equipment at a cost of $100,000, which has an expected life of 5 years and is estimated to generate an annual cash flow of $25,000. The second option is to purchase a used piece of equipment at a cost of $60,000, which has an expected life of 4 years and is estimated to generate an annual cash flow of $20,000. The company uses a discount rate of 8% to evaluate investment opportunities. Which option should the company choose based on net present value (NPV) analysis?

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The detailed answer for the above question is provided below To evaluate the two options based on net present value NPV analysis we need to calculate ... View the full answer