Calculate project eac

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Barry Boswell is a financial analyst for Dossman Metal? Works, Inc. and he is analyzing two alternative configurations for the? firm's new plasma cutter shop. The two? alternatives, denoted A and B? below, will perform the same? task, but alternative A will cost ?$80,000 to? purchase, while alternative B will cost only $55,000. ?Moreover, the two alternatives will have very different cash flows and useful lives. The? after-tax costs for the two projects are as? follows:

a. Calculate each? project's EAC, given a discount rate of 10 percent.

b. Which of the alternatives do you think Barry should? select? Why?

Year Alternative A Alternative B

0 $(80,000) $(55,000)
1 $(20,000) $(6,000)
2 $(20,000) $(6,000)
3 $(20,000) $(6,000)
4 $(20,000)  
5 $(20,000)  
6 $(20,000)  
7 $(20,000)

Reference no: EM132817925

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