Question
Majestic Corporation is considering two mutually exclusive machines that perform the same task. The two alternatives provide the following net investments and net annual cash
Majestic Corporation is considering two mutually exclusive machines that perform the same task. The two alternatives provide the following net investments and net annual cash flows:
| Year | Equipment A | Equipment B |
| 0 | -$20,000 | -$20,000 |
| 1 | 12,590 | 6,625 |
| 2 | 12,590 | 6,625 |
| 3 | 12,590 | 6,625 |
| 4 |
| 6,625 |
| 5 |
| 6,625 |
| 6 |
| 6,625 |
| 7 |
| 6,625 |
| 8 |
| 6,625 |
| 9 |
| 6,625 |
Assume a required rate of return of 15 percent, using replacement chain approach, which project should be selected?
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Understanding Financial Statements
Authors: Lyn Fraser, Aileen Ormiston
11th edition
133874036, 978-0133874037
