Question: Part B. XYZ corp. needs to replace their old manufacturing unit. They have two options for the new manufacturing unit. Option M costs $0.6 million,

Part B.

XYZ corp. needs to replace their old manufacturing unit. They have two options for the new manufacturing unit. Option M costs $0.6 million, has a life of 5 years, and will generate after- tax cash flows of $0.18 million every year. Option N has a cost of $1 million, 10-year life, and will generate after-tax cash flows of $0.15 million every year. Ignore the tax effects. The cost of capital is 10%. Which option (M or N) should XYZ corp. go far?

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