Seacraft Carriers is considering two alternative cargo ships. Ship A has an expected life of 7 years,

Question:

Seacraft Carriers is considering two alternative cargo ships. Ship A has an expected life of 7 years, will cost $60 million, and will produce net cash flows of $17 million per year. Ship B has a life of 14 years, will cost $75 million, and will produce net cash flows of $15 million per year. Seacraft plans to serve the route for 14 years. Inflation in operating costs, ship costs, and cargo rates is expected to be zero, and the company's is 12%. What is the equivalent annual for each ship? Which ship should be accepted?
Annuity
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