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Best Co. is evaluating a project that will increase annual sales by $100,000 per year and incremental cash costs by $60,000 per year. The project
Best Co. is evaluating a project that will increase annual sales by $100,000 per year and incremental cash costs by $60,000 per year. The project will require an investment of $125,000 in fixed assets, which can be depreciated on a straight-line to a zero bookvalue over the 5 -year life of the project. The applicable tax rate is 25%. The company expects the fixed asset can be sold at the end of the project (year 5 ) for $7,500 salvage value. You are tasked with comparing this project with another which lasts 10 years. In order to do this you must calculated its equivalent annual cost (EAC). At a discount rate of 12% (after tax) what is this project's EAC? LAC=1.500 1.500EAC2000
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