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    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 Preview

    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 ...

    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.