You are operating an old machine that is expected to produce a cash inflow of $5,800 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,800 but is much more efficient and will provide a cash flow of $11,200 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 16%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual cost of the purchase price Should you replace your equipment now? Yes O No

You are operating an old machine that is expected to produce a cash inflow of $5,800 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,800 but is much more efficient and will provide a cash flow of $11,200 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 16%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual cost of the purchase price Should you replace your equipment now? Yes O No

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...

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