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

Cash Flows ($ thousands)

Machine	C0	C1	C2	C3	C4
A	-120	55	60	80	150
B	-125	60	65	-30	200

Note: The real opportunity cost of capital is 10.5%.

a) Calculate the NPV of each machine. (5 marks) b) Calculate the equivalent annual cash flow from each machine. (5 marks) c) Which machine should you buy? Explain. (5 marks) d) As finance manager of the company you should advise the manager about the best investment criteria to use in this situation. You should explain to the board of directors the pros and cons of NPV method. In addition, in the meeting, one of the managers claims that we should consider IRR for the project as well, do you agree with his opinion? Explain your answer. (5 marks)