Germania Corporation is considering replacing its plant cooling unit. The existing unit has recently "died" and has no salvage value. Of the two competing cooling units, B has a long life but a higher initial cost than the cheaper unit A. The following data are available:
|
Year
|
NCFA
|
NCFB
|
Year
|
NCFA
|
NCFB
|
|
0
|
-$50,000
|
-$79,000
|
3
|
$25,000
|
$28,000
|
|
1
|
25,000
|
28,000
|
4
|
-
|
28,000
|
|
2
|
25,000
|
28,000
|
5
|
-
|
28,000
|
The marginal cost of capital is 19 percent. Which cooling unit should be purchased? Why?