Mike? Mulligan, CEO of Mulligan Excavation? Inc, needs to replace Mary? Anne, his old? steam-driven shovel. Mike is looking at three used Caterpillar hydraulic excavators. Each alternative is a different model and each is a different? age, and so each has a different expected working life and productive capability. Mike has produced estimates? (in the table? below) of the purchase price of each excavator and the associated after-tax cash flows that he expects to earn.? Mike's cost of capital is 9%.
Calculate the equivalent annual annuity for Model A.
Based on your analysis Mick should choose:
Time Model A Model B Model C
1 -143 -109 -119
2 51 97 46
3 70 41 44
4 35 63
5 34