Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively chea or $12 million. The system will last 3 years. Do-It-Right sells a sturdier but more expensive system for $21 million; Both systems entail $2 million in operating costs; both will be depreciated straight-line to a final value of zero ove either will have any salvage value at the end of its life. The firm's tax rate is 20%, and the discount rate is 15%. Ei eplaced at the end of its life. . What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. as a positive value. Enter your answer in millions rounded to 2 decimal places.) b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate call answer as a positive value. Enter your answer in millions rounded to 2 decimal places.) C. Which system should Blooper install?
Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively chea or $12 million. The system will last 3 years. Do-It-Right sells a sturdier but more expensive system for $21 million; Both systems entail $2 million in operating costs; both will be depreciated straight-line to a final value of zero ove either will have any salvage value at the end of its life. The firm's tax rate is 20%, and the discount rate is 15%. Ei eplaced at the end of its life. . What is the equivalent annual cost of investing in the cheap system? (Do not round intermediate calculations. as a positive value. Enter your answer in millions rounded to 2 decimal places.) b. What is the equivalent annual cost of investing in the more expensive system? (Do not round intermediate call answer as a positive value. Enter your answer in millions rounded to 2 decimal places.) C. Which system should Blooper install?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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