Question
In: Finance
The Pasta factory will open soon. The owner has chosen two from the several tenders, but...
The Pasta factory will open soon. The owner has chosen two from the several tenders, but cannot decide which one to accept, so he turns to you for advice. The same quality of pasta can be produced by both machines, and they can be replaced with the same conditions in long run. The expected return of similar investments is 16%. The machine details are the following:
| "A" machine | "B" machine | ||
| Purchase price (K EUR) | 150 | 100 | |
| Lifetime (year) | 5 | 3 | |
| Yearly operational costs (K EUR) | 20 | 30 | |
| Yearly revenue (K EUR) | 100 | 115 | |
a) Which machine would you choose by the NPV?
b) Which machine would you choose by the equivalent annual benefit?
c) Assume that you use the machine as private, so the yearly revenues do not count. Which machine would you choose if you need the machine for a long-term, and you can purchase a new machine with the same conditions?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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