In: Finance
Compute the Equivalent Annual Cost for the two machines described below. Assume that both do identical jobs, both will be depreciated over their useful lives using the straight line method to zero salvage value, will have zero scrap value at the end of their useful lives. Use a 10% discount rate and a 30% tax rate. Machine A Useful life 8 years Initial cost $80,000 Annual operating costs $6,500 after-tax Machine B Useful life 5 years Initial cost $35,000 Annual operating costs $8,200 after-tax