40

e. RCB will 40. Tisla Motors needs to select an assembly line for producing their new SUV. They have two options: Option A is a highly automated assembly line that has a large up-front cost but low maintenance cost over the years. This option will cost $5 million today with a yearly operating cost of $2 million. The assembly line will last for 5 years and be sold for $4 million in 5 years. Option B is a cheaper alternative with less technology, a longer life, but higher operating costs. This option will cost $2 million today with an annual operating cost of $3 million. This assembly line will last for 8 years and be sold for $1 million in 8 years. The firm's cost of capital is 18%. Assume a tax rate of zero percent. The equivalent annual cost (EAC) of better option should be $ million. a. 3.710 b. 3.867 c. 2.851 d. 2.945 e. 3.040