ou are considering two different methods of constructing a new warehouse. The first method uses...
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ou are considering two different methods of constructing a new warehouse. The first method uses prefabricated building segments, would have an initial cost of $4.8 million, would have annual maintenance costs of $100,000 and would last for 25 years. The second alternative would employ a new carbon fibre panel technology, would have an initial cost of $6 million, would have maintenance costs of $525,000 every ten years and is expected to last 40 years. Both buildings are in CCA class 1 (CCA rate of 4%). The salvage value for each would be 25% of initial cost. The firm uses a 15% cost of capital and it has a 38% tax rate.
Calculate the NPV for each machine using the six step approach (nearest dollar without dollar sign ($) or comma, e.g. 15000) Negative cash flow is -15000):
What is the NPV for Alternative A? Answer
What is the NPV for Alternative B? Answer
What is the EAC for Alternative A? Answer
What is the EAC for Alternative B? Answer
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