Problem: Jameson Cargile, Inc. is looking at two new bulldozers with similar investment amounts and has peformed an NPV analysis showing that the YellowJacket has an NPV over the 8 year life of -$6,352,229 while the Bumblebee shows an NPV of -$4,620,640.
What could be said about the above situation?
1) Both bulldozers are acceptable choices because they will get the job done. NPV is just for analysis.
2) The YellowJacket is a better choice because the negative NPV is greater than the negative NPV associated with the Bumblebee.
3) Neither answer is a good NPV but the Bumblebee has the lower negative NPV of the two making it the better choice of the two.
4) The negative NPVs indicate that the company will see a huge profit from both units and the Bumblebee's lower number indicates that a lower initial investment is needed, so it's better.