Question
Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. Gold Star
Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. Gold Star would need eight SALs, and each SAL costs $3,250 and requires $330 of maintenance each year. At the end of the computers seven-year life, Gold Star expects to sell each one for $220. Alternatively, Gold Star could buy six HALs. Each HAL costs $3,700 and requires $465 of maintenance every year. Each HAL lasts for five years and has a resale value of $210 at the end of its economic life. Gold Star will continue to purchase the model that it chooses today into perpetuity. Gold Star has tax rate of 38 percent. Assume that the maintenance costs occur at year-end. Depreciation is straight-line to zero. What is the EAC of each model if the appropriate discount rate is 11 percent? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)
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