A firm has the choice of three machines, H, I or J, but it can afford only one. Interest
rates are 10% p.a. Machine H costs £10,000; machine I costs £13,000; machine J costs
£15,000. Forecast cash inflows are as follows (£):
Year | H | I | J |
1 | 3,000 | 4,000 | 5,500 |
2 | 4,000 | 6,000 | 6,500 |
3 | 5,000 | 7,000 | 8,200 |
Calculate the NPV of each machine using the discount factor table (Figure 14.3).