(Related to Checkpoint 11.2) (Calculating EAC) Barry Boswell is a financial analyst for Dossman Metal Works,...
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(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 $85,000 to purchase, while alternative B will cost only $65,000. 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 11 percent. b. Which of the alternatives do you think Barry should select? Why? a. Alternative A's EAC at a discount rate of 11% is $ (Round to the nearest cent.) Data table Year Alternative A Alternative B 0 $(85,000) $(65,000) 1 (16,000) (7,000) 2 (16,000) (7,000) 3 (16,000) (7,000) 4 (16,000) 5 (16,000) 6 (16,000) 7 (16,000) (Click on the icon in order to copy its contents into a spreadsheet.) - X (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 $85,000 to purchase, while alternative B will cost only $65,000. 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 11 percent. b. Which of the alternatives do you think Barry should select? Why? a. Alternative A's EAC at a discount rate of 11% is $ (Round to the nearest cent.) Data table Year Alternative A Alternative B 0 $(85,000) $(65,000) 1 (16,000) (7,000) 2 (16,000) (7,000) 3 (16,000) (7,000) 4 (16,000) 5 (16,000) 6 (16,000) 7 (16,000) (Click on the icon in order to copy its contents into a spreadsheet.) - X
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