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Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $140,000, has a...

Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $140,000, has a 5-year life, and costs $10,100 per year to operate. The relevant discount rate is 10 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $10,300 at the end of the project’s life. The relevant tax rate is 24 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment?

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Expert Solution

Solution :

The equivalent annual cost (EAC) of this equipment = - $ 36,605.44

= -$ 36,605 ( when rounded off to the nearest whole number )

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 3 months ago
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