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Padano Pizza Ltd is considering the purchase of a new pizza oven. It is looking at two different ovens. The first is a relatively standard
Padano Pizza Ltd is considering the purchase of a new pizza oven. It is looking at two different ovens. The first is a relatively standard oven and would cost 60,000, last for 7 years, and produce annual cash flows of 15000 per year. The alternative is the deluxe, award winning oven, which costs 85,000. The deluxe oven would last for 9 years and produce cash flows of 17,000 per year. Assuming an 8 percent required rate of return on both projects, compute their equivalent annual annuity (EAA). Which oven you would recommend purchasing?
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