A company is considering the purchase of a new machine, and estimates of the most likely cash flows are as follows:

The cost of capital is 15% and the net present value is £28 300.

Transcribed Image Text:

Initial outlay Cash inflows (1000 units at 30 per unit) Year 0 Year 1 () () Year 2 () Year 3 () -200 000 300 000 300 000 300000 Variable costs 200 000 200000 200 000 Net cash flows -200 000 +100000 +100000 +100 000