A firm is considering which of two devices to install to reduce costs in a particular situation. Both devices cost $50,000 and have useful lives of five-years with no salvage value. Device A can be expected to result in $600 savings annually. Device B will provide cost savings of $1,000 the first year, but will decline by $100 annually, making the second year's benefits $900, the third year $800, and so forth. Determine the equivalent uniform annual benefit for each device and state which the device the firm should use. Assume a 7% interest rate. (Hint - see slide 20 from the 3/25/21 lecture.)

Which of the following statements accurately describes how costs and benefits are calculated?

Financial information that is capable of making a difference in a decision is

Burke enterprises is considering a machine costing $30 billion that will result in initial after-tax cash savings of $3.7 billion at the end of the first year, and these savings will grow at a rate of 2 percent per year for 11 years. after 11 years, the company can sell the parts for $5 billion. burke has a target debt/equity ratio of 1.2, a beta of 1.79. you estimate that the return on the market is 7.5% and t-bills are currently yielding 2.5%. burke has two issuances of bonds outstanding. the first has 200,000 bonds trading at 98% of par, with coupons of 5%, face of $1000, and maturity of 5 years. the second has 500,000 bonds trading at par, with coupons of 7.5%, face of $1000, and maturity of 12 years. kate, the ceo, usually applies an adjustment factor to the discount rate of +2 for such highly innovative projects. should the company take on the project?