Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following ta Machine A $15,000 $2,200 He is told to assume that: Original Cost Labor per year Maintenance per year Salvage value 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine A = $ The NPV for Machine B = $ Using the net present value as the basis of comparing the machines, Tim should recommend $4,000 $1,600 Machine B $20,000 $4,800 $800 $7,500 (round your response to the nearest whole number and include a minus sign if necessary). (round your response to the nearest whole number and include a minus sign if necessary).
Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following ta Machine A $15,000 $2,200 He is told to assume that: Original Cost Labor per year Maintenance per year Salvage value 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine A = $ The NPV for Machine B = $ Using the net present value as the basis of comparing the machines, Tim should recommend $4,000 $1,600 Machine B $20,000 $4,800 $800 $7,500 (round your response to the nearest whole number and include a minus sign if necessary). (round your response to the nearest whole number and include a minus sign if necessary).
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 4MC
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![Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table:
He is told to assume that:
Original Cost
Labor per year
Maintenance per year
Salvage value
1. The life of each machine is 3 years.
2. The company thinks it knows how to make 14% on investments no more risky than this one.
3. Labor and maintenance are paid at the end of the year.
The NPV for Machine A = $
The NPV for Machine B = $
Machine A
$15,000
$2,200
$4,000
$1,600
(round your response to the nearest whole number and include a minus sign if necessary).
(round your response to the nearest whole number and include a minus sign if necessary).
Using the net present value as the basis of comparing the machines, Tim should recommend
Machine B
$20,000
$4,800
$800
$7,500](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4c9b1a62-2ea1-4ef5-90fd-001da168d5ec%2F4e3c9b26-6532-4390-af11-ecaa01bb0920%2Fxc6ui0c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table:
He is told to assume that:
Original Cost
Labor per year
Maintenance per year
Salvage value
1. The life of each machine is 3 years.
2. The company thinks it knows how to make 14% on investments no more risky than this one.
3. Labor and maintenance are paid at the end of the year.
The NPV for Machine A = $
The NPV for Machine B = $
Machine A
$15,000
$2,200
$4,000
$1,600
(round your response to the nearest whole number and include a minus sign if necessary).
(round your response to the nearest whole number and include a minus sign if necessary).
Using the net present value as the basis of comparing the machines, Tim should recommend
Machine B
$20,000
$4,800
$800
$7,500
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