Briefly explain the analytical tools, which used to determine the desirability of investment proposals.

You have two alternatives for the replacement of the old machine in your family-owned business. Machine X & Y meet the same efficiency level and perform the same activities but generate different cash flows. The cost is $105,000 for each machine. Machine X has a useful life of 5 years and Y has 3 years useful life. The discount rate is 12%. Using the after-tax costs, calculate NPV for each project and select the best alternative.

Year Alternative X Alternative Y 0 (105,000) (105,000) 1 (15,000) (8,000) 2 (15,000) (8,000) 3 (15,000) (8,000) 4 (15,000) - 5 (15,000) -