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Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $138,000, has a...

Bridgton Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $138,000, has a 4-year life, and costs $13,800 per year to operate. The relevant discount rate is 12 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 $11,500 at the end of the project’s life. The relevant tax rate is 25 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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Solution :

The equivalent annual cost (EAC) of this equipment is = - $ 45,354.71

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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