Problem
Christal Jewlery wishes to select the best of three possible machines, which are expected to satisfy the company's current need to increase the production capacity of jewelry accessories. All three machines A, B, and C are just as risky. The company plans to use a 12% cost of capital to evaluate each of them. The initial investment and annual cash inflows over the life of each machine are shown in the table on the image.
Calculate the NPV of each machine during its useful life. Sort machines in descending order of NPV.
Use the NPV method to evaluate and rank machines in descending order of NPVA.
Which machine would you recommend buying and why?