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?
This solution calculates the NPV and cash flows.