Asset 1 has discounted cash flows of $108,724 over four years and Asset 2 has $107,733 once adjusted to the same four years. Both cost $100,000. What are their net present values?

1. Net present value is discounted cash flows minus the cost of the asset. 2. Asset 1 gives $108,724 minus $100,000, which is $8,724. 3. Asset 2 gives $107,733 minus $100,000, which is $7,733. 4. Both are positive, so both proposals pay for themselves. 5. Asset 1 carries the higher net present value, so it should be purchased. 6. Asset 2 runs for six years, but only four of them count once the horizons are matched. 7. Swapping the two figures is easy to do, since the shorter lived asset is the one that wins here. _Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 9.8 Capital Investment Analysis_