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Author Question: Mills Corp. is considering two mutually exclusive machines. Machine A requires an up-front ... (Read 95 times)

redpassion

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on: Aug 7, 2023
Mills Corp. is considering two mutually exclusive machines. Machine A requires an up-front expenditure at t = 0 of $510,000, has an expected life of 2 years, and will generate positive after-tax cash flows of $390,000 per year (all cash flows are realized at the end of the year) for 2 years. At the end of 2 years the machine will have zero salvage value, but every 2 years the company can purchase a replacement machine with the same cost and identical cash inflows.

Alternatively, it can choose Machine B, which requires an expenditure of $1.2 million at t = 0, has an expected life of 4 years, and will generate positive after-tax cash flows of $430,000 per year (all cash flows are realized at year-end). At the end of 4 years, Machine B will have an after-tax salvage value of $100,000.

The cost of capital is 11%. What is the NPV (on an extended 4-year life) of the better machine?


◦

$197,438


◦

$199,925


◦

$283,552


◦

$286,026

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by redpassion on Aug 7, 2023

MajorWaffle

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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redpassion

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Reply 2 on: Aug 7, 2023
Wow, this really help

xiazhe

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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