Question: 1. When two investment alternatives have the same total expected cash flows but differ in the timing of those flows, which method of evaluating those investments is superior,
(a) accounting rate of return or
(b) net present value?
2. Tak Company has a machine with a book value of $50,000 and a remaining five-year useful life. A new machine is available at a cost of $75,000, and Tak can also receive $40,000 for trading in its old machine. The new machine will reduce variable manufacturing costs by $12,000 per year over its five-year useful life. Should the machine be replaced?