You have the following information about the firm: 2,000,000 shares outstanding with market share price of $80 per share No preferred shares A total of 40,000 bonds with YTM=6%. All bonds mature 18 years from now and have the same annual coupon rate. A debt-to-equity ratio of D/E=1/3 A corporate tax rate of T=30% It is expected to pay $4 dividends next year and dividends are expected to grow at a constant rate. If it needs to issue new equity, it faces a flotation costs of F=15% Assume also that the risk-free interest rate is 5%, market expected rate of return is 14% and the firms beta is 0.6

YYY inc. needs to decide which kind of equipment to use in the production. Cheaper but less reliable equipment costs $100,000; requires annual maintenance costs of $20,000 per year and must be replaced every 4 years. A more expensive equipment costs $180,000; requires only a single maintenance at t=3 with the costs of $80,000 and needs to be replaced every 7 years. Which equipment YYY needs to buy and why if the appropriate cost of capital (discount rate) is 10%?