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

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Zoysia University must purchase mowers for its landscapedepartment. The university can buy four EVF mowers that cost $7,600each and have annual, year-end maintenance costs of $1,675 permower. The EVF mowers will be replaced at the end of Year 4 andhave no value at that time. Alternatively, Zoysia can buy six AEHmowers to accomplish the same work. The AEH mowers will be replacedafter seven years. They each cost $6,600 and have annual, year-endmaintenance costs of $1,875 per mower. Each AEH mower will have aresale value of $800 at the end of seven years. The university’sopportunity cost of funds for this type of investment is 9 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? (Your answers should be a negative value and indicated bya minus sign. Do not round intermediate calculations and round youranswers to 2 decimal places, e.g., 32.16.)

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4.4 Ratings (744 Votes)

Model EVF movers Cost per mover 7600 No of movers required 4 The cost of acquisition 30400 Life of the assets 4 Resale vaulue at the end 0 Annual Maintenance cost 670000 Discount rate 9 Annuity PV factor 1 1094009 323972 Calculation See Answer

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Zoysia University must purchase mowers for its landscapedepartment. The university can buy four EVF mowers that cost $7,600each and have annual, year-end maintenance costs of $1,675 permower. The EVF mowers will be replaced at the end of Year 4 andhave no value at that time. Alternatively, Zoysia can buy six AEHmowers to accomplish the same work. The AEH mowers will be replacedafter seven years. They each cost $6,600 and have annual, year-endmaintenance costs of $1,875 per mower. Each AEH mower will have aresale value of $800 at the end of seven years. The university’sopportunity cost of funds for this type of investment is 9 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? (Your answers should be a negative value and indicated bya minus sign. Do not round intermediate calculations and round youranswers to 2 decimal places, e.g., 32.16.)