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(d) Machines A and B have the following cash flows Co -120 .-120 Cash flows (shs. '000 C2 C3 C4 120 130 140 121 133

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(d) Machines A and B have the following cash flows Co -120 .-120 Cash flows (shs. '000 C2 C3 C4 120 130 140 121 133 G. 110 110 Cs 150 Machine A Machine B Go 160 Machine C was purchased five years ago for shs. 200,000/- and produces an annual cash flow of shs. 80,000/-. It has no salvage value but is expected to last another five years. The company can either replace machine C with machine A now or replace it! with machine B at the end of five years. The company's cost of capital is 10% per annum. What should the company do? (7 marks)

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