Question: Use the table provided in Appendix B to calculate the equivalent annual annuity for each machine referred to in Example5.2. Which machine is the better

Use the table provided in Appendix B to calculate the equivalent annual annuity for each machine referred to in Example5.2. Which machine is the better buy?

Data from Example5.2

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

The business has a cost of capital of 10 per cent.

State which of the two machines, if either, should be acquired.

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

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