(Related to Checkpoint 11.2) (Calculating EAC) 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 $95,000 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? Data Table a. Alternative A's EAC at a discount rate of 10% is $N. (Round to the n Year Alternative A Alternative B S(55,000) (6,500) (6,500) (6,500) S(95,000) (21,000) (21,000) (21,000) (21,000) (21,000) (21,000) (21,000) (Click on the icon D in order to copy its contents into a spreadsheet.) 1 2 3 4 5

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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Question
(Related to Checkpoint 11.2) (Calculating EAC) 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 $95,000 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: E
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?
- X
Data Table
a. Alternative A's EAC at a discount rate of 10% is $. (Round to the n
Year
Alternative A
Alternative B
S(55,000)
(6,500)
(6,500)
(6,500)
S(95,000)
(21,000)
1
2
(21,000)
3
(21,000)
4
(21,000)
(21,000)
(21,000)
(21,000)
(Click on the icon O in order to copy its contents into a spreadsheet.)
5
6
7
Transcribed Image Text:(Related to Checkpoint 11.2) (Calculating EAC) 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 $95,000 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: E 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? - X Data Table a. Alternative A's EAC at a discount rate of 10% is $. (Round to the n Year Alternative A Alternative B S(55,000) (6,500) (6,500) (6,500) S(95,000) (21,000) 1 2 (21,000) 3 (21,000) 4 (21,000) (21,000) (21,000) (21,000) (Click on the icon O in order to copy its contents into a spreadsheet.) 5 6 7
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