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Your company just spent $10 million developing a new product - the Aaron Rodgers bobble-head toy - and you have to decide whether or not to launch the product. Your marketing experts are projecting the new toy's sales will create 1.5 million in FCF the first year, and these FCFs will grow by 2% per year forever. However, they also point out that launching the new product will reduce your FCFs from sales of another product - the Brett Favre bobble-head toy - by $1 million per year forever. The appropriate discount rate for the sale of bobble-head toys is 12%. Should you go ahead and launch the new product? And how much firm value would launching the product create or destroy)? Yes, launch product, creates $15 million in value Yes, launch product, creates $6.67 million in value No, don't launch product, destroys $3.33 million in value Yes, launch product, creates $5 million in value on SMU Inc. is considering two potential machines to produce their Mustang logo hats forever. The red machine has an equivalent annual cost of $75,000 per year. The blue machine would cost $100,000 to purchase, would cost $20,000 each year to maintain, and would last for 10 years. At the end of year 10, the blue machine could be sold for $10,000. Assume the appropriate discount rate is 10% and ignore taxes. What is the equivalent annual cost of the blue machine, and which machine should the company choose? Blue Machine EAC = $85,432 ... choose blue machine Blue Machine EAC = $82,390 ... choose red machine Blue Machine EAC = $35,647 ... choose blue machine Blue Machine EAC = $15,783 ... choose blue machine