Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System
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Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $21,000, which will generate cash flows of $6,000 at the end of each of the next 6 years. Alternatively, the company can spend $11,000 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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First solve for each projects NPV Project A CF 0 21000 CF 1 6000 N j 6 IYR 10 ...View the full answer
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Related Book For 
Fundamentals of Financial Management
ISBN: 978-1337395250
15th edition
Authors: Eugene F. Brigham, Joel F. Houston
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