Corcoran consulting is deciding which of two computer systems to purchase. The firm can purchase state-of-the-art equipment (System A) for $527,000, which will generate cash flows of $315,000 at the end of each year for the next 2 years. Alternatively, the company can spend $510,500 for equipment that can be used for 4 years and will generate cash flows of $180,000 at the end of each year (System B). The company's WACC is 10%. Both projects can be repeated indefinitely. Based on this information, determine which system should the company choose and calculate the system's EAA (equivalent annual annuity).
Ο Choose project A. The EAA is $11,904.76.
Ο Choose project A. The EAA is $11,719.05.
Ο Choose project B. The EAA is $15,056.30.
Ο Choose project B. The EAA is $18,952.15.
Ο Choose project B. The EAA is $22,848.01.
