Question

Machine X has an upfront cost of $469,500 and annual operating costs of $14,175 over its 4-year life. Machine Y costs $415,000 upfront and has annual operating costs of $6,700 over its 3-year life. Whichever machine is purchased will continue to be replaced at the end of its useful life. If the required return is 17.75% for both machine, what is the absolute value of the dollar difference between the EACs of the two machines?

Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

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life. Whichever machine is purchased will continue to be replaced
at the end of its useful life. If the required return is 15.50% for
both machine, what is the absolute value of the dollar difference
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life. Whichever machine is purchased will continue to be replaced
at the end of its useful life. If the required return is 17.50% for
both machine, what is the absolute value of the dollar difference
between the EACs of the two machines?

Machine X has an upfront cost of $402,000 and annual operating
costs of $12,150 over its 4-year life. Machine Y costs $370,000
upfront and has annual operating costs of $5,980 over its 3-year
life. Whichever machine is purchased will continue to be replaced
at the end of its useful life. If the required return is 15.50% for
both machine, what is the absolute value of the dollar difference
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Question 11 options:
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