6. Why are interest charges not deducted from cash flows for a capital budgeting analysis?

7. Briefly described a sensitivity analysis, scenario analysis, and simulation analysis?

8. Why is it useful to compute an Equivalent Annual Annuity for two projects?

9. EQUIVALENT ANNUAL ANNUITY Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for an after-tax cost of $21,000, which will generate after-tax cash flows of $6,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $11,000 that can be used for 3 years and will generate after-tax cash flows of $6,000 at the end of each year (System B). If the company's WACC is 10% and both "projects" can be repeated indefinitely, which system should be chosen, and what is its EAA?

6. Why are interest charges not deducted from cash flows for a capital budgeting analysis? 7. Briefly described a sensitivity analysis, scenario analysis, and simulation analysis? 8. Why is it useful to compute an Equivalent Annual Annuity for two projects? 9. EQUIVALENT ANNUAL ANNUITY Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A ) for an after-tax cost of $21,000, which will generate after-tax cash flows of $6,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $11,000 that can be used for 3 years and will generate after-tax cash flows of $6,000 at the end of each year (System B). If the company's WACC is 10% and both "projects" can be repeated indefinitely, which system should be chosen, and what is its EAA