Question: Machines A and B are mutually exclusive and are expected to produce the following real cash flows Cash Flows ($ thousands) Machine machine C0 C1

Machines A and B are mutually exclusive and are expected to produce the following real cash flows Cash Flows ($ thousands)

Machine

machine C0 C1 C2 C3
A -103 +113 +124
B -123 +113 +124 +136

The real opportunity cost of capital is 9%. (Use PV table.)

a. Calculate the NPV of each machine.?

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

c. Which machine should you buy A or B?

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