Question: Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table: Machine
Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table:
| Machine A | Machine B | |||
| Original Cost | $10,000 | $20,000 | ||
| Labor per year | $2,400 | $4,000 | ||
| Maintenance per year | $4,000 | $1,000 | ||
| Salvage value | $2,000 | $7,500 |
He is told to assume that:
1. The life of each machine is 3 years.
2. The company thinks it knows how to make 12% on investments no more risky than this one.
3. Labor and maintenance are paid at the end of the year.
What is the NPV for Machine A?
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
