Answer Happy

QUESTION 2 Although projects A and B below have the same initial cost ($35, 000) their cash flows perform differently over the four-year period. Year Cash-Flow Machine A Cash-Flow Machine B 0 ($35,000) ($35,000) 1 $ 20,000 $ 10,000 2 $ 15,000 $ 10,000 3 $ 10,000 $ 15,000 4 $ 10,000 $ 20,000 Calculate the Payback period for machines A and B to determine how long it will take to recover the initial outlay. Rank the machines by the shortest Payback period and giving reasons, state which machine is selected in preference to the other. QUESTION 3 NET PRESENT VALUE (NPV) Consider the data in Question 2. Assuming that the discounting factor is 20%, construct a table for NPV by calculating the present value - multiplying cash flow by discount factor. Determine the NPV for both machines. Giving reasons, state which machine is selected in preference to the other.