Scholastic Co. is evaluating a machine with an initial cost of $450,000 and a five-year life that costs $85,000 per year to operate (assume sales = $0). The firm uses straight-line depreciation; the applicable discount rate is 9%. The machine will have a salvage value of $100,000 at the end of the project's life. The firm has a tax rate of 21%. Note: do not include the salvage value when calculating the annual depreciation expense. Calculate the EAC for the project. (

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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  1. Scholastic Co. is evaluating a machine with an initial cost of $450,000 and a five-year life that costs $85,000 per year to operate (assume sales = $0).  The firm uses straight-line depreciation; the applicable discount rate is 9%.  The machine will have a salvage value of $100,000 at the end of the project's life. The firm has a tax rate of 21%. Note: do not include the salvage value when calculating the annual depreciation expense.

 

Calculate the EAC for the project. (Enter a positive value and round to 2 decimals)

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