Problem 6-23 Equivalent Annual Cost Sheep Ranch Golf Academy Is evaluating new golf practice equipment. The "Dimple- Max" equipment costs $125,000, has a 6-year life, and costs $9,600 per year to operate. The relevant discount rate is 9 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $9,300 at the end of the project's life. The relevant tax rate is 24 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? (A negative amount should be Indicated by a minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. 29,221.50 EAC $
Problem 6-23 Equivalent Annual Cost Sheep Ranch Golf Academy Is evaluating new golf practice equipment. The "Dimple- Max" equipment costs $125,000, has a 6-year life, and costs $9,600 per year to operate. The relevant discount rate is 9 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $9,300 at the end of the project's life. The relevant tax rate is 24 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? (A negative amount should be Indicated by a minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. 29,221.50 EAC $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Problem 6-23 Equivalent Annual Cost
Sheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple-
Max" equipment costs $125,000, has a 6-year life, and costs $9,600 per year to operate.
The relevant discount rate is 9 percent. Assume that the straight-line depreciation
method is used and that the equipment is fully depreciated to zero. Furthermore,
assume the equipment has a salvage value of $9,300 at the end of the project's life. The
relevant tax rate is 24 percent. All cash flows occur at the end of the year. What is the
equivalent annual cost (EAC) of this equipment? (A negative amount should be
Indicated by a minus sign. Do not round Intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
29,221.50 X
EAC
$
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