Faleye consulting is deciding which of to computer systems yo purchase. It can purchase state-of-the-art equipment (System A) for $21000, which will generate cash flows of $6000 at the end of each of the next 6 years. Alternatively, the comany can spend $11000 for equipment that can be used for 3 years and will generate csh flos of 6000 at the end of each year (System B). If the companys WACC is 10% and both projects can be repeated indefinetly, which system should be chosen, and what is its EAA?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...
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Faleye consulting is deciding which of to computer systems yo purchase. It can purchase state-of-the-art equipment (System A) for $21000, which will generate cash flows of $6000 at the end of each of the next 6 years. Alternatively, the comany can spend $11000 for equipment that can be used for 3 years and will generate csh flos of 6000 at the end of each year (System B). If the companys WACC is 10% and both projects can be repeated indefinetly, which system should be chosen, and what is its EAA?

 

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