Office Automation, Inc must choose between two copiers, the XX40 of the RH45. The XX40 costs $1,500
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Office Automation, Inc must choose between two copiers, the XX40 of the RH45. The XX40 costs $1,500 and will last for three years. The copier will require a real after-tax cost of $120 per year after all relevant expenses. The RH45 costs $2,300 and will last five years. The real after-tax cost for the RH45 will be $150 per year. All cash flows occur at the end of the year. The inflation rate is expected to be 5 percent per year, and the nominal discount rate is 14 percent. Which copier should the company choose?
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
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Related Book For 
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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