Question: Problem 12-5 Equivalent annual annuity Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $23,000,

Problem 12-5 Equivalent annual annuity

Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $23,000, which will generate cash flows of $8,000 at the end of each of the next 6 years. Alternatively, the company can spend $14,000 for equipment that can be used for 3 years and will generate cash flows of $8,000 at the end of each year (System B). If the companys WACC is 5% and both projects can be repeated indefinitely, which system should be chosen, and what is its EAA?

Choose Project A

, whose EAA = $

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