Question

\$250,000 You are considering two machines A B that can be used for the same purpose . Machine A costs will reduce costs by $ 70,000 per year , needs networking capital of $ 20,000 at time zero which be released at the end of the project , has a 5 year straight line depreciable life and can be sold at the end of the project's life for $ 50,000 . Machine B costs $ 320,000 will reduce costs by the same $ 70,000 per year , has net working capital of $ 40,000 at time zero ( also released at the end of its life ) , has a ten year traight line depreciable life and can be sold at the end of its life for $ 60,000 . Assume hat the tax rate is 38 % and the discount rate is 10 % . Calculate an Equivalent Annual ost for each machine . What are the net present values for these two projects

Answer 1