Solution-The withit corporation is considering two

The withit corporation is considering two alternatives

Reference no: EM13962736

3) The Withit Corporation is considering two alternatives for automating their machine-parts operation. Alternative 1 requires an initial investment of $70,000 and decreasing yearly O&M costs as shown in the table below. It has a five-year life span. Alternative 2 requires an initial investment of $90,000 and has annual yearly costs of $500 over a ten-year life span. Both machines have zero salvage value. Assume an interest rate of 10%.

Calculate the NPV and IRR for each alternative. How would you compare the two?

Year	Alternative 1	Alternative 2
0	-$70	-$90
1	-10	-0.5
2	-8	-0.5
3	-6	-0.5
4	-4	-0.5
5	-2	-0.5
6		-0.5
7		-0.5
8		-0.5
9		-0.5
10		-0.5

(All values in $1,000)

Reference no: EM13962736

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The withit corporation is considering two alternatives

Reference no: EM13962736

Reference no: EM13962736

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