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a) You are trying to choose between purchasing one of two machines for a factory. Machine A costs $15,396.00 to purchase and has a 3.00 year life. Machine B costs $19,419.00 to purchase but has a 5.00 year life. Regardless of which machine you purchase, it will have to be replaced at the end of its operating life. Which machine should you choose and what is the cost TODAY of running the machine for the next 28.00 years? Assume a discount rate of 14.00 percent.

b) A lawn service company uses a low-end mower for their yards. The mower costs $2,000.00 initially, and then has an annual cost of $300.00 for gasoline and servicing. The company uses the mower for three years and then replaces with an identical model. The company has a 12.00% desired return on their investments. What is the NPV of one mower for the firm over 3 years? (express as a negative)

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Financial Management, Finance

Category:- Financial Management
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