eBook

The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next eight years. Machine A costs $9.9 million but will provide after-tax inflows of $4.3 million per year for 4 years. If Machine A were replaced, its cost would be $11.8 million due to inflation and its cash inflows would increase to $4.6 million due to production efficiencies. Machine B costs $13.2 million and will provide after-tax inflows of $4.1 million per year for 8 years. If the WACC is 13%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places.

Machine -Select-(A,B) is the better project and will increase the company's value by $ millions, rather than the $ millions created by Machine -Select-(A, B).