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Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million, and will produce net cash flows of $27 million per year. Shao plans to serve the route for only 10 years. The company’s cost of capital is 12%. What is the equivalent annual annuity for each plane?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91825822

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