The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will

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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 costs $8.9 million but will provide after-tax inflows of $4.5 million per year for 4 years. If Machine A were replaced, its cost would be $9.8 million due to inflation and its cash inflows would increase to $4.7 million due to production efficiencies. Machine B costs $13.9 million and will provide after-tax inflows of $4.3 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain.

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Related Book For  answer-question

Fundamentals of Financial Management

ISBN: 978-1337395250

15th edition

Authors: Eugene F. Brigham, Joel F. Houston

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