Question
Garfield Corp. is choosing between two items of equipment that do identical tasks. The equipment will be replaced at the end of its useful life.
Garfield Corp. is choosing between two items of equipment that do identical tasks. The equipment will be replaced at the end of its useful life. Equipment A costs $3,000 and has a lifespan of three years. After-tax cash flows are 1,100 for year 1, 1700 for year 2, 1,200 for year 3. Equipment B costs 3500 and has a lifespan of four years. After tax cash flows are 2600 year 1, 2600 year 2, 1200 year 3, 1300 for year 4. Both items depreciate to zero. Discount rate is 11%. Which is the better choice?
Any help on this practice problemem would be great been struggling on this one for a while.
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