The Explorer Company has the opportunity to invest in one of two mutually exclusive machines that...

The Explorer Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $15 million but realizes after-tax inflows of $6 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $20 million and realizes after-tax inflows of $5 million per year for 7 years, after which it must be replaced. The cost of capital is 9%. What is the equivalent annual annuity for each machine? Which machine should the Explorer Company choose and why?

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I Have solved this question in excel and and on paper also, Howerver I cannot attach the whole excel file.

Moreover I have highlighted the answers for your convenience, Please find the answers attached below.

jeff jeffy answered 1 year ago

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