Question
onsider the following two machines a company can purchase. The following table provides the costs of the machines and the annual cash flows obtained from
onsider the following two machines a company can purchase. The following table provides the costs of the machines and the annual cash flows obtained from the machines over their lifetimes.
| Initial Cost | Cash Inflows per year | Years of Service | |
| Machine A | $20,000 | $14,000 | 6 |
| Machine B | $9,000 | $15,000 | 5 |
The discount rate is 1%.
Given that Machine A has an NPV of $61,136.67 and Machine B has an NPV of $63,801.47, what are the equivalent annual cash flows for each machine?
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Advanced Modelling In Mathematical Finance
Authors: Jan Kallsen, Antonis Papapantoleon
1st Edition
3319458736, 978-3319458731
