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

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A firm is must choose to buy the GSU-3300 or the UGA-3000. Bothmachines make the firm’s production process more efficient which inturn increases incremental cash flows. The GSU-3300 producesincremental cash flows of $24,581.00 per year for 8 years and costs$104,374.00. The UGA-3000 produces incremental cash flows of$28,483.00 per year for 9 years and cost $126,299.00. The firm’sWACC is 7.73%. What is the equivalent annual annuity of theUGA-3000?

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4.3 Ratings (1015 Votes)
Equivalent Annual Annuity EAA of the UGA3000 Year Annual Cash Inflow Present Value factor at 773 Present Value of Annual Cash Inflow 1 28483 0928247 2643925    See Answer
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A firm is must choose to buy the GSU-3300 or the UGA-3000. Bothmachines make the firm’s production process more efficient which inturn increases incremental cash flows. The GSU-3300 producesincremental cash flows of $24,581.00 per year for 8 years and costs$104,374.00. The UGA-3000 produces incremental cash flows of$28,483.00 per year for 9 years and cost $126,299.00. The firm’sWACC is 7.73%. What is the equivalent annual annuity of theUGA-3000?

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