Q1: Barry Boswell is a financial analyst for Dossman Metal Works Lod. He is analysing two alternative configurations for the firms new plasma-cutting machine. The two Alternatives denoted A and B below, perform the same task; although they both cost $80,000 to purchase and install, they offer different cash flows. Alternative A has a useful life of seven years whereas alternative B will only last for three years. The after-tax costs for the two projects are as follows: (15 marks)

Year	Alternative A	Alternative B
0	$(80,000)	$(80,000)
1	(20,000)	(6000)
2	(20,000)	(6000)
3	(20,000)	(6000)
4	(20,000)
5	(20,000)
6	(20,000)
7	(20,000)

1. Calculate each projects equivalent annual cost (EAC) given a 10% discount rate. (5 marks)
2. Calculate each projects NPV (discount rate 10%). (5 marks)
3. After considering both the NPV and EAC, which alternative do you think Barry should select? Give reasoning for the same. (5 marks)