Which machine should be purchased and why

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Your firm is evaluating the merits of several different machines. Machine A has a useful life of 5-years, generates an NPV of $53,250, an IRR of 13.6% and an equivalent annual cost of $10,316. Machine B has a useful life of 3-years, an NPV of $61,051, an IRR of 12.5%, and an equivalent annual cost of $9,724. Machine C has a useful life of 4-years, generates an NPV of $55,225, an IRR of 15.2% and an equivalent annual cost of $7,535 Machine D has a useful life of 7-years, generates an NPV of $64,020, an IRR of 11.4% and an equivalent annual cost of $8,885.

Which machine should be purchased and why?
Machine C, because it has the highest IRR.
Machine D, because it has the highest NPV.
Machine A, because it has the most positive EAC.
Machine B, because it has the shortest useful life.

 

Reference no: EM13280071

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