Question: Machines A and B are mutually exclusive and are expected to produce the following real cash flows: The real opportunity cost of capital is 10%.

Machines A and B are mutually exclusive and are expected to produce the following real cash flows:

Machines A and B are mutually exclusive and are expected


The real opportunity cost of capital is 10%.

a. Calculate the NPV of each machine.

b. Calculate the equivalent annual cash flow from each machine.

c. Which machine should youbuy?

Cash Flows ($ thousands) Machine Co -100 -120 +110 +110 +121 +121 +133

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