Question
Machines A and B are mutually exclusive and are expected to produce the following real cash flows: Cash Flows ($ thousands) Machine C 0 C
Machines A and B are mutually exclusive and are expected to produce the following real cash flows:
| Cash Flows ($ thousands) | ||||
| Machine | C0 | C1 | C2 | C3 |
| A | 112 | +122 | +133 | |
| B | 78 | +94 | +78 | +72 |
The real opportunity cost of capital is 12%. a. Calculate the NPV of each machine. (Enter your answers in dollars not in thousands. Round your answers to the nearest whole dollar amount.) b. Calculate the equivalent annual cash flow from each machine. (Enter your answers in dollars not in thousands. Round your answers to the nearest whole dollar amount.) c. Which machine should you buy?
- Machine B
- Machine A
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The Handbook For Investment Committee Members
Authors: Russell L. Olson
1st Edition
0471719781, 978-0471719786
