Machine A costs $400,000 with returns of $70,000 per year for 10 years. The residual value will be $80,000 at the end of 10 years. Machine B costs $300,000 with returns of $60,000 per year for 10 years, and no residual value. Based on the IRR's, which machine should be purchased? If the firm's cost of capital is 8%, which machine should be purchased? Based on both the IRR and the NPV's, which machine should be selected?

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The Answer of Machine A costs $400,000 with returns of $70,000 per year for 10 years. The residual value will be $80,000 at the end of 10 years. Machine B costs $300,000 with returns of $60,000 per year for 10 years, and no residual value. Based on the IRR's, which machine should be purchased? If the firm's cost of capital is 8%, which machine should be purchased? Based on both the IRR and the NPV's, which machine should be selected?

Machine a Costs $400,000 with Returns of $70,000 Per Year