Question
Company is considering a project to upgrade its current operation system. The project requires an initial cost of $480,000 to purchase an equipment and the
Company is considering a project to upgrade its current operation system. The project requires an initial cost of $480,000 to purchase an equipment and the equipment will be depreciated straight-line to zero.
The project is expected to last for 5 years and the equipment is expected to have $52,000 salvage value.
Every year, the system requires pre-tax operating costs of $48,000 from year 1 to year 5.
The required return is 12%.
The tax rate is 21%.
Please calculate the Equivalent Annual Cost for this project.
(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
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