EAC and Inflation Office Automation, Inc., must choose between two copiers, the XX40 or the RH45. The XX40 costs $700 and will last for three years. The copier will require an aftertax cost of $100 per year after all relevant expenses. The RH45 costs $900 and will last five years. The real aftertax cost for the RH45 will be $110 per year. All cash flows occur at the end of the year. The inflation rate is expected to be 5 percent per year, and the nominal discount rate is 14 percent. Which copier should the company choose?

 LO.1