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

C$0$ C$1$ C$2$ C$3$

A $-100+110+121$

B $-120+110+121+133$

The opportunity cost of capital is $10\%.$ a$)$ Calculate the NPV of each machine.

b$)$ Calculate the Equivalent Annual NPV of each machine. The Equivalent Annual NPV is based on the annuity concept. Basically you take the NPV of a machine and divide it by AF$($# years of machine cash flows, $10\%).$ This will give you another way to think about the NPV you$$ve solved for above.

c$)$ Which machine should you buy?