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
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.
VATAL SAME Schoo Machine A an Year 1 2 3 4 5 Keripu Machine C Machine B 01 $b$val 50 000 38 000 50 000 38 000 38 000 38 000 26 000 38 000 26 000 38 000 $ 26 000 26 000 38 000 50 000 50 000
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