Question

1A.

Jose's firm 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 $25,225.00 per year for 8 years and costs $101,274.00. The UGA-3000 produces incremental cash flows of $28,342.00 per year for 9 years and cost $126,395.00. The firm’s WACC is 7.43%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.

1B.

Jose's firm must again 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 $25,405.00 per year for 8 years and costs $100,339.00. The UGA-3000 produces incremental cash flows of $29,024.00 per year for 9 years and cost $123,349.00. The firm’s WACC is 8.14%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.

Please round to 2 decimal places. (will vote)

Answer 1