Question
Consider the following two machines a company can purchase. The following table provides the costs of the machines and the annual cash flows obtained from
Consider the following two machines a company can purchase. The following table provides the costs of the machines and the annual cash flows obtained from the machines over their lifetimes.
| Initial Cost | Cash Inflows per year | Years of Service | |
| Machine A | $19,000 | $5,000 | 7 |
| Machine B | $6,000 | $13,000 | 5 |
The discount rate is 4%.
What is the net present value for each machine?
Machine A =
Machine B =
What is the firm's cost of capital?
What are the quivalent annual costs?
EAC for A =
EAC for B=
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett
7th Edition
0073530751, 9780073530758
