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).
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