Machine B is expected to produce the following real cash flows:

machine	C0	C1	C2	C3
B	-125	+115	+126	+138

machine C was purchased five years ago for $200,000 and produces and annual real cash flow of $80,000. it has no salvage value but its expected to last another five years the company can replace machine C with Machin B either or at the end of five years.

the real opportunity cost of capital is 10% (use PV table)

which should it do

a. replace after five years

or

b. replace now