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The management of Casilla Manufacturing Company (CMC) has decided to invest in a new robotic system to increase the productivity of the company. The company has enough money to invest in one system, and has narrowed the choice down to Asea System and Bsea System. Asea System requires an up-front cost of $100,000 and then generates positive after-tax cash flows of $60,000 at the end of each of the next two years. The Asea system can be replaced every two years with the cash inflows and outflows remaining the same. Bsea System also requires an up-front cost of $100,000 and then generates positive after-tax cash flows of $48,000 at the end of each of the next three years. Bsea System can be replaced every three years, but each time the system is replaced, both the cash inflows and outflows increase by 10 percent. The company needs a system for the six years, after which time the management plans on liquidating the company. The company's cost of capital is 11 percent. What is the NPV of each system (on a six-year extended basis)? Which system creates the most value to the company? Show your work step by step. Please be clean and neat. Explain, in words, the approach that you have used to solve this problem in 5 lines

Financial Management, Finance

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