Solution-What is the equivalent annual annuity for each

What is the equivalent annual annuity for each machine?

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The Perez Company has the opportunity to invest one of two mutually exclusive machines that will produce a product it will need for the forseeable future. Machine A costs $11 million but realizes after-tax inflows of $5 million per year for 4 years. After 4 years the machine must be replaced. Machine B costs $13 million and realizes after-tax inflowa of 3.5 million per year for 8 years after which it must be replaces. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in machines. The cost of capital is 14%.

a.) By how much would the value of the company increase if it accepted the better machine? Enter your answer in millions. For example, an answer of 1.2 million should be entered as 1.2 million not 1,200,000. Round your answer to two decimal places.

What is the Equivalent annual annuity for each machine? Round your answer to two decimal places

Reference no: EM13295509

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What is the equivalent annual annuity for each machine?

Reference no: EM13295509

Reference no: EM13295509

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