Question

A project with a life of 11 has an initial fixed asset investment of $35,280, an initial NWC investment of $3,360, and an annual OCF of –$53,760. The fixed asset is fully depreciated over the life of the project and has no salvage value. |

If the required return is 11 percent, what is the project's equivalent annual cost, or EAC? |

Answer #1

Year | Cashflows | PVF at 11% | Present value | |

0 | -38640 | 1 | -38640 | |

1 | -53760 | 0.900901 | -48432.4 | |

2 | -53760 | 0.811622 | -43632.8 | |

3 | -53760 | 0.731191 | -39308.8 | |

4 | -53760 | 0.658731 | -35413.4 | |

5 | -53760 | 0.593451 | -31903.9 | |

6 | -53760 | 0.534641 | -28742.3 | |

7 | -53760 | 0.481658 | -25894 | |

8 | -53760 | 0.433926 | -23327.9 | |

9 | -53760 | 0.390925 | -21016.1 | |

10 | -53760 | 0.352184 | -18933.4 | |

11 | -50400 | 0.317283 | -15991.1 | |

Present value of outflows | -371236 | |||

Divide: Annuity for 11 years | 6.20652 | |||

Equivalent Annual ccost | -59813.9 | |||

A project with a life of 9 has an initial fixed asset
investment of $22,260, an initial NWC investment of $2,120, and an
annual OCF of –$33,920. The fixed asset is fully depreciated over
the life of the project and has no salvage value.
If the required return is 11 percent, what is the project's
equivalent annual cost, or EAC?

A project with a life of 7 has an initial fixed asset
investment of $23,520, an initial NWC investment of $2,240, and an
annual OCF of –$35,840. The fixed asset is fully depreciated over
the life of the project and has no salvage value.
If the required return is 14 percent, what is the project's
equivalent annual cost, or EAC?

A project with a life of 10 has an initial fixed asset
investment of $41,580, an initial NWC investment of $3,960, and an
annual OCF of –$63,360. The fixed asset is fully depreciated over
the life of the project and has no salvage value.
If the required return is 15 percent, what is the project's
equivalent annual cost, or EAC?

A project with a life of 10 has an initial fixed asset
investment of $23,100, an initial NWC investment of $2,200, and an
annual OCF of –$35,200. The fixed asset is fully depreciated over
the life of the project and has no salvage value.
If the required return is 11 percent, what is the project's
equivalent annual cost, or EAC?
Multiple Choice
$-23,182.62
$-41,332.63
$-33,459.75
$-39,364.41
$-37,396.19

A project with a life of 10 has an initial fixed asset
investment of $20,160, an initial NWC investment of $1,920, and an
annual OCF of –$30,720. The fixed asset is fully depreciated over
the life of the project and has no salvage value.
If the required return is 11 percent, what is the project's
equivalent annual cost, or EAC?
$-36,072.12
$-29,201.24
$-34,354.40
$-20,232.10
$-32,636.68
Please show work

A project with a life of 10 has an initial fixed asset
investment of $30,240, an initial NWC investment of $2,880, and an
annual OCF of –$46,080. The fixed asset is fully depreciated over
the life of the project and has no salvage value.
If the required return is 20 percent, what is the project's
equivalent annual cost, or EAC?
Multiple Choice
$-45,788.59
$-53,868.93
$-56,562.37
$-22,584.40
$-51,175.48

A project with a life of 8 has an initial fixed asset
investment of $27,300, an initial NWC investment of $2,600, and an
annual OCF of –$41,600. The fixed asset is fully depreciated over
the life of the project and has no salvage value.
If the required return is 15 percent, what is the project's
equivalent annual cost, or EAC?
Multiple Choice
$-45,670.12
$-40,862.74
$-26,965.33
$-48,073.81
$-50,477.50

A 6-year project has an initial fixed asset investment of
$42,000, an initial NWC investment of $4,000, and an annual OCF of
-$64,000. The fixed asset is fully depreciated over the life of the
project and has no salvage value.
Required:
If the required return is 19 percent, what is the project's
equivalent annual cost, or EAC? (Do not round your
intermediate calculations.)

A 7-year project has an initial fixed asset investment of
$16,380, an initial NWC investment of $1,560, and an annual OCF of
-$24,960. The fixed asset is fully depreciated over the life of the
project and has no salvage value. Required: If the required return
is 8 percent, what is the project's equivalent annual cost, or EAC?
(Do not round your intermediate calculations.)
a. $-23,996.30
b. $-20,997.25
c. $-29,642.49
d. $-26,819.40
e. $-28,230.95

A project with a life of 10 has an initial fixed asset
investment of $40,320, an initial NWC investment of $3,840, and an
annual OCF of –$61,440. The fixed asset is fully depreciated over
the life of the project and has no salvage value. If the required
return is 9 percent, what is the project's equivalent annual cost,
or EAC?
$-64,664.85
$-57,858.03
$-43,683.88
$-71,471.68
$-68,068.27
A gym owner is considering opening a location on the other side
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