Zoysia University must purchase mowers for its landscape department. The university can buy six EVF mowers...

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Zoysia University must purchase mowers for its landscapedepartment. The university can buy six EVF mowers that cost $7,900each and have annual, year-end maintenance costs of $1,775 permower. The EVF mowers will be replaced at the end of Year 4 andhave no value at that time. Alternatively, Zoysia can buy seven AEHmowers to accomplish the same work. The AEH mowers will be replacedafter seven years. They each cost $6,900 and have annual, year-endmaintenance costs of $2,225 per mower. Each AEH mower will have aresale value of $700 at the end of seven years. The university’sopportunity cost of funds for this type of investment is 7 percent.Because the university is a nonprofit institution, it does not paytaxes. It is anticipated that whichever manufacturer is chosen nowwill be the supplier of future mowers. What is the EAC of each typeof mower?

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for EAC for each mower we need to calculate first the present value of the costs for each of he mower amc annual maintenance cost r is the rate of See Answer

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Zoysia University must purchase mowers for its landscapedepartment. The university can buy six EVF mowers that cost $7,900each and have annual, year-end maintenance costs of $1,775 permower. The EVF mowers will be replaced at the end of Year 4 andhave no value at that time. Alternatively, Zoysia can buy seven AEHmowers to accomplish the same work. The AEH mowers will be replacedafter seven years. They each cost $6,900 and have annual, year-endmaintenance costs of $2,225 per mower. Each AEH mower will have aresale value of $700 at the end of seven years. The university’sopportunity cost of funds for this type of investment is 7 percent.Because the university is a nonprofit institution, it does not paytaxes. It is anticipated that whichever manufacturer is chosen nowwill be the supplier of future mowers. What is the EAC of each typeof mower?