Question

ABC Corporation has a machine that requires repairs or should be replaced.  ABC has evaluated the two options and calculated the cash flows resulting from each option as follows:

Option A: Repair the Machine

Year	Cash Flow
0	-50,000
1	15,500
2	20,100
3	18,900
4	17,100
5	13,700

 

Option B: Buy a new Machine

Year	Cash Flow
0	-400,000
1	51,300
2	155,000
3	127,800
4	126,900
5	125,100