Sheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $107,000, has a 6-year life, and costs $9,000 per year to operate.The relevant discount rate is 11 percent. Assume that the straight-line depreciationmethod is used and that the equipment is fully depreciated to zero. Furthermore,assume the equipment has a salvage value of $8,100 at the end of the project's life. Therelevant tax rate is 23 percent. All cash flows occur at the end of the year. What is theequivalent annual cost (EAC) of this equipment? (A negative amount should beindicated by a minus sign. Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)EAC

Approach to solving the question:Use Excel if available.Detailed explanation:

Answered: Sheep Ranch Golf Academy is evaluating…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 9P

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