SGS Golf Academy is evaluating different golf practice equipment. The Dimple-Max equipment costs $96,500, has a seven-year

Question:

SGS Golf Academy is evaluating different golf practice equipment. The “Dimple-Max” equipment costs $96,500, has a seven-year life, and costs $11,600 per year to operate. The relevant discount rate is 12 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $10,500 at the end of the project’s life. The relevant tax rate is 34 percent. All cash flows occur at the end of the year. What is the EAC of this equipment?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...