In: Finance
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?
Show all work and formulas in EXCEL
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.