1. Wisconsin Dairy Co. is currently making its capital budgeting decisions for the upcoming year. Among the projects they are considering are two machines: Machine W and Machine WW. Machine W costs $500,000 but will produce expected after-tax cash inflows of $300,000 at the end of each of the next 2 years. Machine WW also costs $500,000 but will produce expected after –tax cash inflows of $165,000 at the end of each of the next 3 years. Both projects have a 10% cost of capital.

 Assume that these are mutually exclusive projects that can be repeated indefinitely overtime with the same expected cash flows. Which project should the company

Answer rating: 100% (QA)

Using the replacement chain method The lifespan of project W is 2 years and 3 years for project WWT... View the full answer