Brad's Fish and Chips Restaurant is booming and as such he needs an automated beer pouring...

 

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Brad's Fish and Chips Restaurant is booming and as such he needs an automated beer pouring machine. He is looking at two used models, one with a life span of 4 years which costs $28,000 and another model which is newer that costs $46,000 and that has an expected life span of 7 years? Having just studied Finance 2- what will you advise Brad to do? The cash flows are after tax. The after tax cost of debt is 5% and the company's cost of capital is 9%. The after-tax cash flows for the 4 year equipment are $31,000 per year and for the 7 year machine $22,000 per year. Show all your calculations. Brad's Fish and Chips Restaurant is booming and as such he needs an automated beer pouring machine. He is looking at two used models, one with a life span of 4 years which costs $28,000 and another model which is newer that costs $46,000 and that has an expected life span of 7 years? Having just studied Finance 2- what will you advise Brad to do? The cash flows are after tax. The after tax cost of debt is 5% and the company's cost of capital is 9%. The after-tax cash flows for the 4 year equipment are $31,000 per year and for the 7 year machine $22,000 per year. Show all your calculations.

Answer rating: 100% (QA)

To advise Brad on which beer pouring machine to choose we need to compare the present value of cash ... View the full answer