Woody Manufacturing Inc. is considering the purchase of a new machine. They have narrowed their choices down to two machines, Machine #1 and Machine #2, each having a cost of $35,000. The following information is available regarding the expected cash inflows from each machine:
When using net present value analysis, Woody uses the same cost of capital for both machines and both machines have a positive net present value.
Based on the above information, which of the following statements is true?
A) Machine #1 will have a higher net present value than Machine #2.
B) Machine #1 will have a lower net present value than Machine #2.
C) Machines #1 and #2 will have the same net present values.
D) Machines #1 and #2 will have the same internal rates of return.
Correct Answer:
Verified
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