eBook

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 $10,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $14,000 that can be used for 3 years and will generate after-tax cash flows of $10,000 at the end of each year (System B). If the companys WACC is 5% and both projects can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediate calculations. Round your answer to the nearest cent.

Choose Project -Select-ABItem 1 , whose EAA = $