Question: You need to decide between two mutually exclusive projects. Project A is investing in Machine A with a useful live of 3 years or investing

You need to decide between two mutually exclusive projects. Project A is investing in Machine A with a useful live of 3 years or investing in machine B with a useful life of 5 years. Additional information.

Machine A: Initial investment of $10 million and annual cost of $500,000 on years 1 to 3.

Machine B: Initial investment of $9 million and annual cost of $800,000 on years 1 to 5.

If the discount rate is 11%, which machine should be chosen?

a. Choose the machine with the lowest IRR.

b. Machine B

c. Machine A

d. Choose the machine with the lowest present value of annual costs.

e. Choose machine with the lowest total cost.

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