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Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $146,000, has a...

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Finance

Bridgton Golf Academy is evaluating new golf practice equipment.The "Dimple-Max" equipment costs $146,000, has a 4-year life, andcosts $10,300 per year to operate. The relevant discount rate is 12percent. Assume that the straight-line depreciation method is usedand that the equipment is fully depreciated to zero. Furthermore,assume the equipment has a salvage value of $10,700 at the end ofthe project’s life. The relevant tax rate is 21 percent. All cashflows occur at the end of the year. What is the equivalent annualcost (EAC) of this equipment?

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4.2 Ratings (882 Votes)
Equivalent Annual Cost EAC for the equipment Initial Investment Cost Initial Investment Cost 146000 Annual Operating Cash Flow OCF Operating Cash Flow OCF Pretax Cost1 Tax Rate Depreciation x Tax Rate 103001 021    See Answer
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