Multiple Choice
Mountain Fresh Water Company is considering two mutually exclusive machines.Machine A has an up-front cost of $100,000 (CF0 = -100,000) ,and it produces positive after-tax cash inflows of $40,000 a year at the end of each of the next six years.Machine B has an up-front cost of $50,000(CF0 = ?50,000) ,and it produces after-tax cash inflows of $30,000 a year at the end of the next three years.The company's cost of capital is 10.5%.Based on the equivalent annual annuity,which machine will be chosen?
A) Afor$71,687
B) A for $16,702
C) B for $23,954
D) B for $9,718
Correct Answer:
Verified
Correct Answer:
Verified
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