Suppose MMM Inc is evaluating a new design equipment. The "Design-Max" equipment costs $97,000, has...
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Suppose MMM Inc is evaluating a new design equipment. The "Design-Max" equipment costs $97,000, has a 5-year life, and costs $10,600 per year to operate. The relevant discount rate is 11%. Assume that the straight-line depreciation method is used, and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a can be sold for $7,500 at the end of the project's life. The applicable tax rate is 23 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? [Hint: Since its a cost-based evaluation, the benefits or revenues can be assumed to be zero for the OCF calculation] $55.271.24$38,691.05$43.887.13$51.484.22$49.321.76
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