(NPV) A company has the choice between two different types of machines. Machine A costs...
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Finance
(NPV) A company has the choice between two different types of machines. Machine A costs less, but it also has a shorter life expectancy of two years. B costs more but lasts longer for four years. The expected cash flows after taxes for the two different types are as follows:
Machine
0
1
2
3
4
A
(10,000)
8,000
8,000
B
(12,000)
5,000
5,000
5,000
5,000
The cost of money of the firm is 10%. Analyze the two options and advise the company which one is better.
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