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Determine equivalent annual cost for each alternative

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The Ellerson Furniture Company must purchase a new polisher. The cash flows for the two alternatives are presented below. Both alternatives have a 5 year useful life. If the company's MARR is 9%, which set-up should be used?

                                 First cost             Annual operating cost

True Grit               $6800                       $1500

Smoothest              $4700                         $2000

Problem 1: Determine EAC (equivalent annual cost) for each alternative and the savings associated with the preferred alternative.

Reference no: EM132660169

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