Purchase of new smoker oven for cooking barbecue

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Reference no: EM131844063

(Equivalent annual annuity)

Rib? & Wings-R-Us is considering the purchase of a new smoker oven for cooking barbecue, ribs, and wings. It is looking at two different ovens. The first is a relatively standard smoker and would cost $ 50,000, last for 8 years, and produce annual cash flows of $ 16,000 per year. The alternative is the deluxe, award-winning Smoke-alator, which costs $ 78,000 and, because of its patented humidity control, produces the "moistest, tastiest barbecue in the world." The Smoke-alator would last for 11 years and produce cash flows of $ 23,000 per year. Assuming a required rate of return of 10 percent on both projects, compute their equivalent annual annuities (EAAs).

The EAA of the standard smoker is $. (Round to the nearest dollar.)

The EAA of the Smoke-alator is $. (Round to the nearest dollar.)

Rib? & Wings-R-Us should purchase the Smoke-alator or standard smoker.

Reference no: EM131844063

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