Engineers for Madness Toys, Inc. are proposing the replacement of production equipment with a new state-of-the-art piece of equipment, which will have lower operating costs and last 5 years. The alternative is to upgrade the existing equipment, but the upgrade will only extend the life of the equipment for another 3 years and not reduce operating costs. Given the cash flows listed below and using an 11.5% discount rate, decide whether the company should upgrade or purchase the new equipment.

Engineers for Madness Toys, Inc. are proposing the replacement of production equipment with a new state-of-the-art piece of equipment, which will have lower operating costs and last 5 years. The alternative is to upgrade the existing equipment, but the upgrade will only extend the life of the equipment for another 3 years and not reduce operating costs. Given the cash flows listed below and using an 11.5% discount rate, decide whether the company should upgrade or purchase the new equipment. Cash Flows ($ millions) Year o Year 1 Year 2 Year 3 148 4 3 $ $ 70 $ $ 8 $ 10 $ 12 Year 4 -$ 3 Year 5 -$ 2 New equipment Upgrade a. What is the equivalent annual cost of the new equipment? (Enter your answer in millions, rounded to two decimal places. Use a minus sign to indicate a negative answer.) Equivalent annual cost of the new equipment million b. What is the equivalent annual cost of the upgrade? (Enter your answer in millions, rounded to two decimal places. Use a minus sign to indicate a negative answer.) Equivalent annual cost of the upgrade million c. Which project is a better investment