Question: Germania Corporation is considering replacing its plant cooling unit. The existing unit has recently died and has no salvage value . Of the two competing

Germania Corporation is considering replacing its plant cooling unit. The existing unit has recently "died" and has no salvage value. Of the two competing cooling units, B has a long life but a higher initial cost than the cheaper unit A. The following data are available:

The marginal cost of capital is 19 percent. Which cooling unit should be purchased?Why?

Year NCFA NCF Year NCF ANCF 0 $50,000 -$79,000 25,000 28,000 28,000 $25,000$28,000 28,000 28,000 4 25,000

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NPV A 50000 25000 PVIFA 0193 50000 25000 2140 3500 NPV B 79000 28000 PVIFA 0195 79000 28000 3058 6... View full answer

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