What is equivalent annual cost

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Reference no: EM132000824

1. You are evaluating a new machine that has a four-year life and costs $100,000. The pretax operating costs of operating the machine are $20092 per year. Use straight-line depreciation to zero over the project's life and assume an after-tax salvage value of $13,200 at the end of four years. If your tax rate is 34 percent and your discount rate is 7 percent. What is the Equivalent Annual Cost (EAC)?

a. $26854

b. $38761

c. $24881

d. $31311

2. Bond A is similar to Bond B in all aspects, except that Bond B has a higher coupon rate than Bond A.

If the yield on both bonds increases by 1%, you expect that

a. Bond B will depreciate in price less than Bond A

b. Bond B will appreciate in price more than Bond A

c. Bond B will appreciate in price less than Bond A

d. Bond B will depreciate in price more than Bond A

Reference no: EM132000824

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