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Table 1 Investment Machine 1 (RM) Machine 2 (RM) Initial outflows 62,500 80,000 Inflows at end of year 1 30,000 30,000 2 27,500 35,000 3
Table 1 Investment Machine 1 (RM) Machine 2 (RM) Initial outflows 62,500 80,000 Inflows at end of year 1 30,000 30,000 2 27,500 35,000 3 25,000 50,000 Required: a. Find the NPV at a required rate of return of 5% of Machines 1 and 2 Discount factors at 5% YR 1 0.952 YR 2 YR 3 0.864 0.907 b. Which machine would ABStores select, based on the NPV financial computations, alone. Show all workings clearly (2 +1 = 3 marks)
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