Question
Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The cash flows associated
Hook Industries is considering the replacement of one of its old metal stamping machines. Three alternative replacement machines are under consideration. The cash flows associated with each are shown in the following table:
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Machine A Machine B Machine C
Initial investment (CF0) $84,700 $60,500 $129,500
Year (t) Cash inflows (CFt)
1 $18,300 $12,200 $49,700
2 $18,300 $14,300 $30,100
3 $18,300 $15,500 $19,700
4 $18,300 $18,400 $19,500
5 $18,300 $19,600 $19,600
6 $18,300 $25,000 $30,200
7 $18,300 $40,300
8 $18,300 $49500
The firm's cost of capital is 12%.
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