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

$4,300

$800

Salvage value

$2,000

$7,000

He is told to assume that:

1. The life of each machine is 3 years.

2. The company thinks it knows how to make 14% on investments no more risky than this one.

3. Labor and maintenance are paid at the end of the year.

The NPV for Machine A=

The NPV for Machine B=

(round your response to the nearest whole number and include a minus sign if necessary).

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!