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3 (Related to Checkpoint 11.2) (Calculating EAC) Barry Boswell is a financial analyst for Dossman Metal Works, Inc. and he is analyzing two alternative configurations
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(Related to Checkpoint 11.2) (Calculating EAC) Barry Boswell is a financial analyst for Dossman Metal Works, Inc. and he is analyzing two alternative configurations for the firm's new plasma cutter shop. The two alternatives, denoted A and B below, will perform the same task, but alternative A will cost $90,000 to purchase, while alternative B will cost only $50,000. Moreover, the two alternatives will have very different cash flows and useful lives. The after-tax costs for the two projects are as follows: :: a. Calculate each project's EAC, given a discount rate of 8 percent. b. Which of the alternatives do you think Barry should select? Why? Year Alternative A Alternative B $(90,000) (18,000) (18,000) (18,000) (18,000) (18,000) (18,000) (18,000) $(50,000) (4,000) (4,000) (4,000) Step by Step Solution
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