A firm is must choose to buy the GSU-3300 or the UGA-3000

Finance Dec 26, 2020

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 $24,967.00 per year for 8 years and costs $102,793.00. The UGA-3000 produces incremental cash flows of $27,391.00 per year for 9 years and cost $126,208.00. The firm’s WACC is 7.46%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.

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