Use the table provided in Appendix B to calculate the equivalent annual annuity for each machine referred
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Use the table provided in Appendix B to calculate the equivalent annual annuity for each machine referred to in Example 5.2. Which machine is the better buy?
Example 5.2
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Khan Engineering Ltd has the opportunity to invest in two competing machines. Details of each machine are as follows: Initial outlay Cash flows 1 year's time 2 years' time 3 years' time Machine A 000 (100) 50 70 Machine B 000 (140) 60 80 32 The business has a cost of capital of 10 per cent. State which of the two machines, if either, should be acquired.
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The equivalent annual annuity for Machine A in 000s is 36 0576...View the full answer
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