Question: (Please show complete solution with NPV Formula) REPLACEMENT CHAIN The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that

(Please show complete solution with NPV Formula)

REPLACEMENT CHAIN

The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A costs $8.9 million but will provide after-tax inflows of $4.5 million per year for 4 years. If Machine A were replaced, its cost would be $9.8 million due to inflation and its cash inflows would increase to $4.7 million due to production efficiencies. Machine B costs $13.9 million and will provide after-tax inflows of $4.3 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain.

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