Question: 29. Before the restaurant chain purchases the above machine, another sales rep approaches them with a less expensive machine called the Burner. Although cheaper, the
29. Before the restaurant chain purchases the above machine, another sales rep approaches them with a less expensive machine called the "Burner." Although cheaper, the Burner has a shorter warranty. The Burner oven costs $23,000, fully installed. Again, the chain doesn't believe the ovens will have any impact on sales. This Burner will lower overall use and maintenance costs by $3,000 annually. The ovens will be sold for approximately $2,500 each when they go out of warranty in 6 years, but will be depreciated to $0 book value over 6 years via straight-line method. The chains marginal tax rate is 28% and the firm requires a return of 10% on all capital investments. What is the equivalent annual cost (EAC) of one Burner oven? Enter answer in dollars, rounded to the nearest dollar. Enter
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
