Question
Equivalent annual cost: Your company have project that required intial investment to buy a machine for $250,000. Calculate EAC. The operating cost for the machine
Equivalent annual cost: Your company have project that required intial investment to buy a machine for $250,000. Calculate EAC. The operating cost for the machine (before tax) is $65,000 per year. The machines expected useful life is 7 years with no salvage value at the end of its useful life. There is no change in the networking capital required. The required return for the project is 10%. The CCA rate for the machines is 20%. The companys marginal income tax rate is 40%. Calculate the NPV for the machine using the six step approach (nearest dollar without dollar sign ($) or comma, e.g. 15000) Negative cash flow is -15000):
What is the NPV for the machine?
What is the EAC for the machine?
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