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Q2. You are considering two mutually exclusive projects which can be repeated. A costs $15 million but will provide inflows of $5.5 million per year
Q2. You are considering two mutually exclusive projects which can be repeated. A costs $15 million but will provide inflows of $5.5 million per year for 4 years. If Machine A was replaced, its cost would be $18 million and its cash inflows would increase to $7.2 million due to production efficiencies. Machine B costs $16 million and will provide after-tax inflows of $6.5 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Use the EAA method. Kindly show working and formula on every step?
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