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 $9.4 million but will provide after-tax inflows of $4.4 million per year for 4 years. If Machine A were replaced, its after-tax cost would be $10.5 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 $13.5 million and will provide after-tax inflows of $4.5 million per year for 8 years. If the WACC is 9%, 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 is the better project and will increase the company's value by $ millions, rather than the s 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 $9.4 million but will provide after-tax inflows of $4.4 million per year for 4 years. If Machine A were replaced, its after-tax cost would be $10.5 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 $13.5 million and will provide after-tax inflows of $4.5 million per year for 8 years. If the WACC is 9%, 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 is the better project and will increase the company's value by $ millions, rather than the s millions created by Machine
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Economics
![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 $9.4 million but will provide after-tax inflows of $4.4 million per year for 4 years. If Machine A were replaced, its after-tax cost would be $10.5 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 $13.5 million and will provide after-tax inflows
of $4.5 million per year for 8 years. If the WACC is 9%, 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.
Machines is the better project and will increase the company's value by $
millions, rather than the s
millions created by Machine S](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F39ff87a2-4ce6-40f2-9cf1-b65787b6c4a8%2Fc0b281e2-06c5-4b61-b507-e341999751af%2F5qrmk6_processed.jpeg&w=3840&q=75)
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 $9.4 million but will provide after-tax inflows of $4.4 million per year for 4 years. If Machine A were replaced, its after-tax cost would be $10.5 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 $13.5 million and will provide after-tax inflows
of $4.5 million per year for 8 years. If the WACC is 9%, 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.
Machines is the better project and will increase the company's value by $
millions, rather than the s
millions created by Machine S
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