Hi guys could anuone help me with this questions please? Problem 12-4 EAC Approa

Question

Hi guys

could anuone help me with this questions please?

Problem 12-4 EAC Approach (LG12-8)

You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $70,000, has a 5-year life, and has an annual OCF (after-tax) of –$11,300 per year. The Keebler CookieMunster costs $96,500, has a 7-year life, and has an annual OCF (after-tax) of –$9,300 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.)

Explanation / Answer

Use PV function in Excel

PMT = -11,300

FV = 0

rate = 11%

N = 5

PV = -41,763.64

total PV = -41,763.63 - 70,000 = 111,763.64

PV = 111,763.64

FV = 0

n = 5

rate = 11%

use rate function in Excel

EAC for Pilsbury 707 = -30,239.92

Similarly for Keebler cookie munster EAC = -29,778.77

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

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