1. Gold Star Industries is in need of new computers. They have narrowed the choices to X and Y. They would need 10 Xs. Each X costs $3750 and requires $500 worth of maintenance each year. At the end of 8 years they can sell each X for $500. They could also buy 8 Ys. Each Y costs $5250 and requires $700 worth of maintenance each year. Ys last 6 years and can be sold at the end for $600 each. Ignore taxes and depreciation. If the WACC is 11% which should they buy?
Here we need to find Present value of cash outflows and present value of salvage value Present value X option... View the full answer