hard · Principles of Finance capital-budgeting
A firm must choose between Machine X, costing $80,000 with a 4-year life and $30,000 annual after-tax cash inflows, and Machine Y, costing $120,000 with a 7-year life and $28,000 annual after-tax cash inflows.
Using a 10% discount rate, which machine should be selected and what is its EAA?
- Machine Y; EAA = $3,351
- Machine X; EAA = $15,097
- Machine X; EAA = $4,763
- Machine Y; EAA = $16,315
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