Computation of equivalent annual cost

Reference no: EM1313866

Computation of equivalent annual cost (EAC) for two machines.

You are evaluating two different machines. The first machine costs $290,000, has a three-year life, and has pre-tax operating costs of $67,000 per year. The second machine costs $510,000, has a five-year life, and has pre-tax operating costs of $35,000 per year. For both machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $40,000. If your tax rate is 35 percent and your discount rate is 10 percent, compute the equivalent annual cost (EAC) for both machines. Which do you prefer, and why?

Reference no: EM1313866

Questions Cloud

If interest rates could be deducted from income : If interest rates could be deducted from income, would an investor change his/her decision based on question 1.

Journal entry for capital asset purchase including trade in : Prepare the general journal entries required to record the acquisition and payment on each of the independent cases above. Round to the nearest dollar.

Deposit currency ratio and cash reserve ratio : Assume an economy in which the reserve ratio is 15 percent, people hold 10 percent of their deposits in the form of cash, and there are no other leakages.

Determining mean and standard error of x - bar distribution : Determine the mean and standard error of the x - bar distribution.

Computation of equivalent annual cost : Computation of equivalent annual cost for two machines and for both machines and use straight-line depreciation to zero over the project's life

Evaluate the cost of the land : Evaluate the cost of the land and the cost of the building as they should be recorded on the books of Martin Buber Co. Assume that the land survey was for the building.

Firms resources limit its search for opportunities : Explain how might a firm's resources limit its search for opportunities. Cite two specific examples for two specific resources.

Graphically representing steady state equilibrium of economy : Consider a market-clearing economy in which output (Y 1 )depends only on the capital stock (k 1 ) and an exogenous productivity variable ( θ1 ) according to the production function y1 = θ 2 f(k 2 ).

Find common stock outstanding : When a corporation has both preferred and common stock outstanding, earnings per share is computed by dividing net income

User Account

All Pages