Using net present value-purchase a new milling machine

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Pat Maggard needs to purchase a new milling machine. She is considering two different competing machines. Milling Machine A will cost $300,000, and will return $80,000 per year for six years, with no salvage value. Milling machine B will cost $220,000, and will return $60,000 for five years, with a salvage value of $30,000. The firm is currently using 7 percent as the cost of capital. Using Net Present Value as the criterion, which machine should be purchased? What is the total payoff in $ of machine?

Reference no: EM13760775

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