Gem Inc. is considering the purchase new equipment to improve their production rates. They are considering two competing offers. Offer A's equipment costs $400,000 and will help increase after-tax cash flows by $120,000 for six years. Offer B's equipment costs $700,000 and will help increase after-tax cash flows by 152,000 for 10 years.Which offer should they accept and why? Note the offers have unequal lives and assume a discount rate of 15%.

Choose B because EANPV= $12,523.56

Choose A because EANPV = $14,305.24

Choose A because EANPV = $54,127.92

Choose B because EANPV = $62,852.83

Answer rating: 100% (QA)

To determine which offer Gem Inc should accept we need to calculate the Equivalent Annual Net Presen... View the full answer