application of the concept of NPV
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The
Year wise Cash flow A B
1 22000 7000
2 25000 5000
3 28000 4500
4 5000 28000
5 4500 25000
6 7000 22000
The estimated useful life of the machines is 6 years and the discount rate is 11%. The
cost of each machine is Rs60000
1. Discuss the steps of application of the concept of NPV to the given situation.
Determine the NPV of Machine A .
2. Determine the NPV of the Machine B. Discuss, which machinery should be
acquired and why?
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