Question: Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $20,000, which will generate cash flows

Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $20,000, which will generate cash flows of $6,000 at the end of each of the next 6 years. Alternatively, the company can spend $12,000 for equipment that can be used for 3 years and will generate cash flows of $6,000 at the end of each year (System B). If the company’s WACC is 10% and both projects can be repeated indefinitely, which system should be chosen and what is its EAA?

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