Discover Inc. wants to change their equipment to buy a more energy efficient one. They have two
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Question:
Discover Inc. wants to change their equipment to buy a more energy efficient one. They have two machines that they can choose one from, Machine A and Machine B. For both, you have to scrap them after their lifespan is over.
Machine A: Upfront cost = 50,000, annual net cash flow = 14,000, lifespan = 7 years, scrap value = 0.
Machine B: Upfront cost = 50,000, annual net cash flow = 20,000, lifespan = 4 years, scrap value = 5,000.
Cost of Capital is 10%.
Which Machine should they buy if it is just a one-time initiative?
Which Machine should they buy if it is a recurring situation?
What is the NPV of Machine A?
What is the NPV of Machine B?
Related Book For
Fundamentals of Financial Management
ISBN: 978-1285867977
14th edition
Authors: Eugene F. Brigham, Joel F. Houston
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