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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.

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  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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