Phoenix Products Inc. requires a new machine to produce a part for a solar air conditioner. Two companies have submitted bids, and you have been assigned the task of choosing one of the machines. Cash flow analysis indicates the following: Year Machine A Machine B 0 −$1,000 −$1,000 1 0 417 2 0 417 3 0 417 4 1,938 417 If the required rate of return for Phoenix Products is 5 percent, which of the following is the most valid statement? Group of answer choices The IRRA < IRRB, therefore accept Machine B. The NPVA < NPVB, therefore accept Machine B. The IRRA > IRRB, therefore accept Machine A. The NPVA > NPVB, therefore accept Machine A. None of these.
Phoenix Products Inc. requires a new machine to produce a part for a solar air conditioner. Two companies have submitted bids, and you have been assigned the task of choosing one of the machines. Cash flow analysis indicates the following: Year Machine A Machine B 0 −$1,000 −$1,000 1 0 417 2 0 417 3 0 417 4 1,938 417 If the required rate of return for Phoenix Products is 5 percent, which of the following is the most valid statement? Group of answer choices The IRRA < IRRB, therefore accept Machine B. The NPVA < NPVB, therefore accept Machine B. The IRRA > IRRB, therefore accept Machine A. The NPVA > NPVB, therefore accept Machine A. None of these.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 10PA: The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000,...
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Question
Phoenix Products Inc. requires a new machine to produce a part for a solar air conditioner. Two companies have submitted bids, and you have been assigned the task of choosing one of the machines. Cash flow analysis indicates the following:
If the requiredrate of return for Phoenix Products is 5 percent, which of the following is the most valid statement?
Year
|
Machine A
|
Machine B
|
0
|
−$1,000
|
−$1,000
|
1
|
0
|
417
|
2
|
0
|
417
|
3
|
0
|
417
|
4
|
1,938
|
417
|
If the required
Group of answer choices
The IRRA < IRRB, therefore accept Machine B.
The NPVA < NPVB, therefore accept Machine B.
The IRRA > IRRB, therefore accept Machine A.
The NPVA > NPVB, therefore accept Machine A.
None of these.
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