You are operating an old machine that is expected to produce a cash inflow of $5,300 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,300 but is much more efficient and will provide a cash flow of $10,450 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 16%.

You are operating an old machine that is expected to produce a cash inflow of $5,300 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,300 but is much more efficient and will provide a cash flow of $10,450 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 16%.

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 4E

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