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Which machine should your firm choose

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Question - Your firm is contemplating investing in a machine as a new investment. There are two machines in the market A and B and the investment decision is a mutually exclusive decision. Machine A costs 100 while machine B costs 120. The following table outlines the future cash flows of each machine.

Machine

Year 1

Year 2

Year 3

A

110

121

0

B

110

121

25

If the cost of capital (discounting rate) is 10%, which machine should your firm choose?

Reference no: EM133004768

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