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(Related to Checkpoint 11.2) (Calculating EAC) Barry Boswell is a financial analyst for Dossman Metal Works, Inc. and he is analyzing two alternative configurations for

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(Related to Checkpoint 11.2) (Calculating EAC) Barry Boswell is a financial analyst for Dossman Metal Works, Inc. and he is analyzing two alternative configurations for the firm's new plasma cutter shop. The two alternatives, denoted A and B below, will perform the same task, but alternative A will cost $75,000 to purchase, while alternative B will cost only $55,000. Moreover, the two alternatives will have very different cash flows and useful lives. The after-tax costs for the two projects are as follows: Data Table a. Calculate each project's EAC, given a discount rate of 8 percent. b. Which of the alternatives do you think Barry should select? Why? a. Alternative A's EAC at a discount rate of 8% is $(Round to the nearest cent.) Year Alternative A Alternative B 0 1 2 3 4 $(75,000) (19,000) (19,000) (19,000) (19,000) (19,000) (19,000) (19,000) $(55,000) (6,500) (6,500) (6,500) 5 6 7

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