You are operating an old machine that is expected to produce a cash inflow of $5,600 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,600 but is much more efficient and will provide a cash flow of $10,900 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 15%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual cost of the purchase price $ 791.60

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You are operating an old machine that is expected to produce a cash inflow of $5,600 in each of the next 3 years before it fails. You
can replace it now with a new machine that costs $20,600 but is much more efficient and will provide a cash flow of $10,900 a year for
4 years.
Calculate the equivalent annual cost of the new machine if the discount rate is 15%. (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
Equivalent annual cost of the purchase price
$
791.60 x
Transcribed Image Text:You are operating an old machine that is expected to produce a cash inflow of $5,600 in each of the next 3 years before it fails. You can replace it now with a new machine that costs $20,600 but is much more efficient and will provide a cash flow of $10,900 a year for 4 years. Calculate the equivalent annual cost of the new machine if the discount rate is 15%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual cost of the purchase price $ 791.60 x
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