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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
(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 $95,000 to purchase, while alternative B will cost only $50,000. Moreover, the two alternatives will have very diferent cash flows and useful lives. The after-tax costs for the two projects are as follows: 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? Year ON Project A $11.100) 650 225 180 Project B $(11,000) 4,000 3,500 3,500 3,500 3,500 Project $(5,300) 1,800 1,800 4,000 4,000 4,000 . 3 4 5 70 470 (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 $95,000 to purchase, while alternative B will cost only $50,000. Moreover, the two alternatives will have very diferent cash flows and useful lives. The after-tax costs for the two projects are as follows: 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? Year ON Project A $11.100) 650 225 180 Project B $(11,000) 4,000 3,500 3,500 3,500 3,500 Project $(5,300) 1,800 1,800 4,000 4,000 4,000 . 3 4 5 70 470
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