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    NPV and Cash Flows

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    Machine A and B are mutually exclusive and are expected to produce the follwing real cash flows. The real opportunity cost of capital is 10%.

    Cash Flows (Thousands)
    Machine Co C1 C2 C3
    A -100 110 121 0
    B -120 110 121 133

    Calculate the NPV of each machine.
    Calculate the equivalent annual cash flow from each machine.
    Which machine should you buy?

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    Solution Summary

    This solution calculates the NPV and cash flows.