Equivalent annual cost calculation: Barry Boswell is a financial analyist for Dossman Metal Works, Inc. and he is analyzing two alternative configurations for the firms new plasma cutter shop. The two alternatives that are denoted A and B below perform the same task and although they each cost to purchase and install they offer very different cash flows. Alternative A has a usefull life of 7 years wheras alternative B will only last for 3 years. The after-tax cash flows from the two projects are as follows: Year 0 Alternative A: (75,000), Alternative B: (75,000) Year 1 Alternative A: (19,000), Alternative B: (5,000) Year 2 Alternative A: (19,000), Alnterative B: (5,000) Year 3 Alternative A: (19,000), Alternative B: (5,000) Year 4 Alternative A: (19,000) Year 5 Alternative A: (19,000) Year 6 Alternative A: (19,000) Year 7 Alternative A: (19,000)

a) Calculate each project's equivalent annual cost (EAC) given discount rate of 12 percent b) Which of the alternatives do you think barry should select?