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A project with a life of 7 has an initial fixed asset investment of $27,720, an...

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Finance

A project with a life of 7 has an initial fixed assetinvestment of $27,720, an initial NWC investment of $2,640, and anannual OCF of –$42,240. The fixed asset is fully depreciated overthe life of the project and has no salvage value.

  

If the required return is 16 percent, what is the project'sequivalent annual cost, or EAC?

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4.1 Ratings (482 Votes)
Projects Equivalent Annual Cost or EAC Net Present Value of the Project Year Annual Cash Flow Present Value factor at 16 Present Value of Annual Cash Flow 1 42240    See Answer
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A project with a life of 7 has an initial fixed assetinvestment of $27,720, an initial NWC investment of $2,640, and anannual OCF of –$42,240. The fixed asset is fully depreciated overthe life of the project and has no salvage value.  If the required return is 16 percent, what is the project'sequivalent annual cost, or EAC?

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