You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $6

Question

You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $60,500, has a 5-year life, and has an annual OCF (after tax) of –$10,700 per year. The Keebler CookieMunster costs $93,500, has a 7-year life, and has an annual OCF (after tax) of –$8,700 per year.

If your discount rate is 11 percent, what is each machine’s EAC? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

If your discount rate is 11 percent, what is each machine’s EAC? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

Explanation / Answer

Pillusburry 707:

NPV = 10700 x Cumulative PVF @ 11% for 5 years + 60500

= 10700 x 3.696 + 60500

= $100047

EAC = 100047 / 3.696

= $27068.99

Keebler CookieMunster:

NPV = 8700 x Cumulative PVF @ 11% for 7 years + 93500

= 8700 x 4.712 + 93500

= $134494

EAC = 134494 / 4.712

= $28543.87

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.