The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A has an after-tax cost of $8.9 million but will provide after-tax inflows of $4.2 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $10 million due to inflation and its after-tax cash inflows would increase to $4.4 million due to production efficiencies. Machine B has an after- tax cost of $13.1 million and will provide after-tax inflows of $3.5 million per year for 8 years. If the WACC is 12%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. is the better project and will increase the company's value by $ Machine A created by Machine B Hide Feedback Partially Correct 9.52 millions, rather than the s 9.90 millions

The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A has an after-tax cost of $8.9 million but will provide after-tax inflows of $4.2 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $10 million due to inflation and its after-tax cash inflows would increase to $4.4 million due to production efficiencies. Machine B has an after- tax cost of $13.1 million and will provide after-tax inflows of $3.5 million per year for 8 years. If the WACC is 12%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. is the better project and will increase the company's value by $ Machine A created by Machine B Hide Feedback Partially Correct 9.52 millions, rather than the s 9.90 millions

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 17P: The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will...

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The Lesseig Company has an opportunity to invest in one oftwo mutually exclusive machines that will produce a product the company will needfor the next 8 years. Machine A costs $8.9 million but will provide after-tax inflowsof $4.5 million per year for 4 years. If Machine A were replaced, its cost would be$9.8 million due to inflation and its cash inflows would increase to $4.7 million dueto production efficiencies. Machine B costs $13.9 million and will provide after-taxinflows of $4.3 million per year for 8 years. If the WACC is 9%, which machine shouldbe acquired? Explain.
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