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The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A has an after-tax cost of $8.3 million but will provide after-tax inflows of $4.6 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $9.9 million due to inflation and its after-tax cash inflows would increase to $4.9 million due to production efficiencies. Machine 8 has an after- tax cost of $13.1 million and will provide after-tax inflows of $3.8 million per year for 8 years. If the WACC is 10%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Machine Select is the better project and will increase the company's value by $ -Select- millions, rather than the $ millions created by Machine

The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A has an after-tax cost of $8.3 million but will provide after-tax inflows of $4.6 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $9.9 million due to inflation and its after-tax cash inflows would increase to $4.9 million due to production efficiencies. Machine 8 has an after- tax cost of $13.1 million and will provide after-tax inflows of $3.8 million per year for 8 years. If the WACC is 10%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Machine Select is the better project and will increase the company's value by $ -Select- millions, rather than the $ millions created by Machine

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A has an after-tax cost of $8.3 million but will provide after-tax inflows of $4.6 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $9.9 million due to inflation and its after-tax cash inflows would increase to $4.9 million due to production efficiencies. Machine B has an after- tax cost of $13.1 million and will provide after-tax inflows of $3.8 million per year for 8 years. If the WACC is 10%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Machine Select is the better project and will increase the company's value by $ -Select- millions, rather than the $ millions created by Machine
Transcribed Image Text:The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A has an after-tax cost of $8.3 million but will provide after-tax inflows of $4.6 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $9.9 million due to inflation and its after-tax cash inflows would increase to $4.9 million due to production efficiencies. Machine B has an after- tax cost of $13.1 million and will provide after-tax inflows of $3.8 million per year for 8 years. If the WACC is 10%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Machine Select is the better project and will increase the company's value by $ -Select- millions, rather than the $ millions created by Machine
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