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(Equivalent annual cost? calculation)??The TempletonManufacturing and Distribution Company of? Tacoma, Washington, iscontemplating the purchase of a new conveyor belt system for one ofits regional distribution facilities. Both alternatives willaccomplish the same task but the Eclipse Model is substantiallymore expensive than the Sabre Model and will not have to bereplaced for 10? years, whereas the cheaper model will need to bereplaced in just 5 years. The costs of purchasing the two systemsand the costs of operating them annually over their expected livesare provided? below:??

.a.??Templeton typically evaluates investments in plantimprovements using a required rate of return of

11

percent.

What are the NPVs for the two? systems?

b.??Calculate the equivalent annual costs for the twosystems.

c.??Based on your analysis of the two systems using both theirNPV and? EAC, which system do you recommend the company? pick? ?Why?

a.

The NPV for Eclipse at a discount rate of

1111?%

is

?$nothing.

?(Round to the nearest? dollar.)

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Data Table

Year	Eclipse		Sabre
0	?$(1 comma 500 comma 0001,500,000?)		?$(900 comma 000900,000?)
1	?(22 comma 00022,000?)		?(45 comma 00045,000?)
2	?(31 comma 00031,000?)		?(45 comma 00045,000?)
3	?(31 comma 00031,000?)		?(58 comma 00058,000?)
4	?(31 comma 00031,000?)		?(58 comma 00058,000?)
5	?(41 comma 00041,000?)		?(85 comma 00085,000?)
6	?(41 comma 00041,000?)
7	?(41 comma 00041,000?)
8	?(41 comma 00041,000?)
9	?(41 comma 00041,000?)
10	?(41 comma 00041,000?)