What is the NPV for Machine B over the six-year period? Which machine is the better buy?
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What is the NPV for Machine B over the six-year period? Which machine is the better buy?
In the case of Machine B, the NPV over the six-year period will be equal to the NPV above plus the equivalent amount three years later. The calculation (in £000s) will be:
NPV = £5.0 +
£5.0
(1 + 0.1)3 = £8.8
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