Asset 1 costs $100,000 and has discounted cash flows of $121,526. Asset 2 costs $140,000 and has discounted cash flows of $157,788. Which should be bought?

1. Asset 1 has a net present value of $121,526 minus $100,000, which is $21,526. 2. Asset 2 has a net present value of $157,788 minus $140,000, which is $17,788. 3. Both are positive, so either would pay for itself. 4. Asset 1 has the higher net present value, so it is the better of the two. 5. Asset 2 does earn more cash each year, which is the trap: its extra $40,000 of price more than absorbs the extra inflow. 6. A lower purchase price on its own proves nothing either, since it says nothing about what the asset returns. _Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 9.8 Capital Investment Analysis_