Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for an after-tax cost of $20,000, which will generate after-tax cash flows of $10,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $11,000 that can be used for 3 years and will generate after-tax cash flows of $10,000 at the end of each year (System B). If the company's WACC is 10% and both "projects" can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediat calculations. Round your answer to the nearest cent. Choose Project -Select- whose EAA=$
Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for an after-tax cost of $20,000, which will generate after-tax cash flows of $10,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $11,000 that can be used for 3 years and will generate after-tax cash flows of $10,000 at the end of each year (System B). If the company's WACC is 10% and both "projects" can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediat calculations. Round your answer to the nearest cent. Choose Project -Select- whose EAA=$
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for an after-tax cost of $20,000, which will generate after-tax cash flows of
$10,000 at the end of each of the next 6 years. Alternatively, the company can purchase equipment with an after-tax cost of $11,000 that can be used for 3 years and will generate after-tax cash flows of
$10,000 at the end of each year (System B). If the company's WACC is 10% and both "projects" can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediate
calculations. Round your answer to the nearest cent.
Choose Project -Select-
whose EAA = $
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