Jazzmaster vs Discmaster Sound Mixer: Computer EAC
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You are evaluating two different sound mixers. The Jazzmaster costs $45,000, has a three-year life, and costs $5,000 per year to operate. The Discmaster costs $65,000, has a five-year life, and costs $4,000 to operate. The relevant discount rate is 12%. Ignoring depreciation and taxes, compute the EAC for both. Which do you prefer?
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Solution Summary
This solution is comprised of a detailed explanation to compute the EAC for both Jazzmaster and Discmaster Sound Mixer and which do you prefer. See attachment.
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To use this method, calculate the PV of each machine at date 0, and express the calculated PV as annuity equivalent for the machine's life time.
EAC is the PV of a single cycle ...
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