Question
A. A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn
A. A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $26,318.00 per year for 8 years and costs $98,929.00. The UGA-3000 produces incremental cash flows of $28,144.00 per year for 9 years and cost $123,970.00. The firms WACC is 8.32%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.
B. A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firms production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,052.00 per year for 8 years and costs $101,519.00. The UGA-3000 produces incremental cash flows of $27,833.00 per year for 9 years and cost $126,177.00. The firms WACC is 7.91%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.
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