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A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the...

A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,279.00 per year for 8 years and costs $103,609.00. The UGA-3000 produces incremental cash flows of $27,576.00 per year for 9 years and cost $125,527.00. The firm’s WACC is 7.00%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes. Round to: 2 decimal places.

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Expert Solution

Solution :

The equivalent annual annuity of the GSU - 3300 = $ 6,927.83

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 1 year ago
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