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Which machine is selected for investment based on npv

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Reference no: EM132965433

Cygnet Vinyard is planning to purchase a machine to aid the harvest. The initial investment is $40,000 with annual maintenance cost of $500. There are two options as follow:

                            Machine A                 Machine B
CFs in year 1       16,000                    19,500
CFs in year 2      14,000                   15,000
CFs in year 3        10,500                13,000
CFs in year 4         8,500                 9,000
CFs in year 5 6,500

Problem a. Are Machine A and Machine B exclusive projects? Explain

Problem b. At the required return of 12%, which machine is selected for investment based on NPV? Is there any further consideration required beyond the NPV comparison in selecting two machines?

Reference no: EM132965433

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