Faleye Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $20,000, which will generate cash flows of $10,000 at the end of each of the next 6 years. Alternatively, the company can spend $11,000 for equipment that can be used for 3 years and will generate cash flows of $10,000 at the end of each year (System B). If the company’s WACC is 10% and both “projects” can be repeated indefinitely, which system should be chosen, and what is its EAA? Do not round intermediate calculations. Round your answer to the nearest cent.

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.