Question
A Southern California based firm is forced to choose between Mexico or Canada to build its manufacturing plant. The cash flows of both plants are
A Southern California based firm is forced to choose between Mexico or Canada to build its manufacturing plant. The cash flows of both plants are shown below. The firm can operate its trucks for extra two years if it chooses Mexico, thus giving Mexico project extra two year life. The firm can borrow from local banks at a rate of 6.00% in Mexico or 5.00% in Canada
| Mexico | Canada | Year |
| -$120,000 | -$110,000 | 0 (Purchase Price) |
| $30,000 | $40,000 | 1 |
| $30,000 | $40,000 | 2 |
| $30,000 | $40,000 | 3 |
| $30,000 | 4 | |
| $30,000 | 5 |
How much is the EAA (effective annual annuity) for the Mexico project? Enter your answer in the following format: + or - 1,234; Hint: Answer is between 1,391 and 1,664
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Real Life Money An Honest Guide To Taking Control Of Your Finances
Authors: Clare Seal
1st Edition
1472272293, 978-1472272294
