Bridgton Golf Academy is evaluating new golf practice equipment.
The \"Dimple-Max\" equipment costs $140,000, has a...
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Bridgton Golf Academy is evaluating new golf practice equipment.The \"Dimple-Max\" equipment costs $140,000, has a 5-year life, andcosts $10,100 per year to operate. The relevant discount rate is 10percent. Assume that the straight-line depreciation method is usedand that the equipment is fully depreciated to zero. Furthermore,assume the equipment has a salvage value of $10,300 at the end ofthe project’s life. The relevant tax rate is 24 percent. All cashflows occur at the end of the year. What is the equivalent annualcost (EAC) of this equipment?
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Solution The equivalent annual cost EAC of
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