1. Calculate the NPV of each machine.
2. Calculate the equivalent annual cash flow from each machine.
3. Which machine should you buy?

Machine C was purchased five years ago for $200,000 and produces an annual real cash flow of $80,000. It has no salvage value but is expected to last another five years. The company can replace machine C with machine B (see Problem 8) either now or at the end of five years. Which should it do?

Question 8 from BMA book 12 edition (modified); Question 30 from BMA book 13a edition Machines A and B are mutually exclusive and are expected produce the following real cash flows to Cash Flows ($ thousa nds) Machine Co C1 C2 C3 A -100 +110 +121 B -120 +110 +121 +133 The real opportunity cost of capital is 10%