question archive Omara bakery is considering the replacement of its old, fully depreciated machine
Omara bakery is considering the replacement of its old, fully depreciated machine
Subject:FinancePrice: Bought3
Omara bakery is considering the replacement of its old, fully depreciated machine. Two new projects are available: Project L, which has a cost of $400,000, a 3-year expected, and after-tax cash flows of $200,000 per year, and Project J, which has a cost of $350,000, a 6-year life, and after-tax cash flows of $120,000 per year. Assume that both projects can be repeated, and that machine prices are not expected to rise. Assume the company’s WACC is 12%.
1. The NPV for Project L is *
a. $143,368.88
b. $200,000
c. -$200,000
d. -$143,368.88
e. None of the above
2. The Equivalent Annual Annuity for Project L is *
a. $80,366.25
b. $120,000
c. $200,000
d. $33,460.41
e. None of the above
3. The Equivalent Annual Annuity for Project J is *
a. 200,000
b. $34,871
c. $33406.41
d. $120,000
e. None of the above
4. which Project would you accept if they are mutually exclusive? *
a .Project L since EAAL > EAAJ.
b. Project J since EAAL < EAAJ.
c. Project J since EAAL >0.
d. Both projects since EAA of both projects is positive.
e. None of the above
