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## Machines A and B are mutually exclusive and are expected

Machines A and B are mutually exclusive and are expected to produce the following real cash flows. The real opportunity cost of capital is 10% pa. 7. Cash flows (S thousands) CO -100+ 120 C3 C2 +121 +121 C1 Machine +133 +110 a. Calculate the NPV of each machine. (Correct to the neatest cent.) (4 marks) b. Which machine should you buy? Why? (1 mark)

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