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A project with a life of 11 has an initial fixed asset investment of $35,280, an...

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?
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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
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