Co. X has gathered the following estimates: Machine A Machine B Cost $600,000 $6
ID: 2470193 • Letter: C
Question
Co. X has gathered the following estimates:
Machine A
Machine B
Cost
$600,000
$600,000
Life
5 yrs
5 yrs
Net Cash Inflow:
Yr 1
$100,000
$500,000
Yr 2
$200,000
$400,000
Yr 3
$300,000
$300,000
Yr 4
$400,000
$200,000
Yr 5
$500,000
$100,000
Co. X uses the net present value method to evaluate capital expenditures. Which of the following two machines has the higher net present value?
Question 13 options:
They are the same
Machine A
Machine B
Cannot be determined from the information provided
Machine A
Machine B
Cost
$600,000
$600,000
Life
5 yrs
5 yrs
Explanation / Answer
Can not be dterimined from the information provided. We need the required return which is used to discount the cahs flows.
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