Company XYZ bases its decisions on NPV and does not consider IRR. It is considering two investments in new equipment that are mutually exclusive. Machinery A has a cost of $90000 and will provide positive cash flows of $30000 per year for 5 years. Machinery B has a cost of $70000 and will provide positive cash inflows of $20000 per year for 7 years. After the machinery has completed their life cycles of 5 and 7 years, the firm must re-purchase the equipment. The firm has a required return of 12%. Which investment should the firm undertake?

Answer rating: 100% (QA)

To determine which investment Company XYZ should undertake we can calculate the Net Present Value NP... View the full answer