Question: Calculating EAC: You are considering two different methods for constructing a new warehouse site. The first method would use prefabricated building segments, would have an

Calculating EAC: You are considering two different methods for constructing a new warehouse site. The first method would use prefabricated building segments, would have an initial cost of 6.5 million would have an annual maintenance cost of 150,000.00, and would last 25 years. The second alternative would employ a new carbon-fibre panel technology, would have an initial cost of 8.2 million, would have a maintenance cost of 650,000.00 every ten years, and is expected to last 40 years. Both buildings would be in CCA Class (at rate of 4%) and it is expected that each would have a salvage value equivalent to 25%of its construction cost at the end of its useful life. The discount rate the firm uses in evaluating projects is 11% the tax rate is 35%. What is the annual cost for each option, and which would you pick?

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