BC Minerals is considering a new production process. Two alternative pieces of equipment are available. Alternative P

Question:

BC Minerals is considering a new production process. Two alternative pieces of equipment are available. Alternative P costs $100,000, has a 10-year life, and is expected to generate annual cash inflows of $22,000 in each of the 10 years. Alternative R costs $85,000, has an 8-year life, and is expected to generate annual cash inflows of $18,000 in each of the eight years. BC Minerals’s weighted is 12 percent. Using the equivalent annual method, which alternative should be chosen?

Annuity
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