xx40: npv and eac

rh45: npv and eac

EAC and Inflation Office Automation, Inc., must choose between two copiers, the XX40 or the RH45. The Xx40 costs $2,400 and will last for three years. The copier will require a real aftertax cost of $160 per year after all relevant expenses. The RH45 costs $2.900 and will last five years. The real aftertax cost for the RH45 will be $255 per year. All cash flows occur at the end of the year. The intiation rate is expected to be 5 percent per year, and the nominal discount rate is 12 percent. Which copier should the company choose? Real discount rate | XX40: NPV EAC RH45: NPV EAC The two copiers have unequal lives, so they can only be compared by expressing both on an equivalent annual basis which is what the EAC method does. We also must be sure to use the real interest rate since the cash flows are stated in real terms. Thus, you prefer the Please write here which copier would you choose because it has the lower (less negative) annual cost