# Nomen Ltd is considering buying a machine and has three options, machine A, B or C, only one of which

## Question:

Nomen Ltd is considering buying a machine and has three options, machine A, B or C, only one of which it will buy. Each machine costs $135 000 and will have a five-year life with no residual value at the end of that time.

The net receipts for each machine over the five-year period are as follows.

Nomen Ltd's cost of capital is 12%.

The discounting factors at 12% are:

year 1. 0.893;

year 2. 0.797;

year 3. 0.712;

year 4. 0.636

year 5. 0.567.

**Required**

Calculate the net present value of each option and state which machine Nomen Ltd should choose.

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**Question Details**

Chapter #

**36**- Investment AppraisalSection: Exercises

Problem: 3

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