The Cunningham Towel Corporation is considering two mutually exclusive pieces of machinery that perform the same task The two alternatives available provide the following set of after tax net cash flows Year Equipment A Equipment B 0 ($20,000) ($20,000) 1 $12,590 $6,625 2 $12,590 $6,625 3 $12,590 $6,625 4 $6,625 5 $6,625 6 $6,625 7 $6,625 8 $6,625 9 $6,625 Equipment A has an expected life of 3 years, while Equipment B has an expected life of 9 years Assume the required rate of return is 15 Using the information in the table, your CFO calculated the NPV of the two projects, NPV a $8,845 and NPV b $11,612 Which project would you select Question options NPV a NPV b

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Question: The Cunningham Towel Corporation is considering two mutually exclusive pieces of machinery that perform the same task. The two alternatives available provide the following set

The Cunningham Towel Corporation is considering two mutually exclusive pieces of machinery that perform the same task. The two alternatives available provide the following set of after-tax net-cash flows.

Year	Equipment A	Equipment B
0	($20,000)	($20,000)
1	$12,590	$6,625
2	$12,590	$6,625
3	$12,590	$6,625
4		$6,625
5		$6,625
6		$6,625
7		$6,625
8		$6,625
9		$6,625

Equipment A has an expected life of 3 years, while Equipment B has an expected life of 9 years. Assume the required rate of return is 15%.

Using the information in the table, your CFO calculated the NPV of the two projects, NPV a = $8,845 and NPV b = $11,612. Which project would you select?

Question options:

	NPV a
	NPV b

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