You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $25,000, has a six-year life, and has an annual OCF (after-tax) of −$5,000 per year. The Keebler Cookie Munster costs $40,000, has a seven-year life, and has an annual OCF (after-tax) of −$500 per year. If your discount rate is 10 percent, what is each machine's EAC?
A) Pillsbury: −$11,594.9, Keebler: $8,716.22
B) Pillsbury: −$11,594.94, Keebler: −$9,145.62
C) Pillsbury: −$10,740.18, Keebler: −$9,145.62
D) Pillsbury: −$10,740.18, Keebler: −$8,716.22

Question

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The Answer of You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $25,000, has a six-year life, and has an annual OCF (after-tax) of −$5,000 per year. The Keebler Cookie Munster costs $40,000, has a seven-year life, and has an annual OCF (after-tax) of −$500 per year. If your discount rate is 10 percent, what is each machine's EAC?
A) Pillsbury: −$11,594.9, Keebler: $8,716.22
B) Pillsbury: −$11,594.94, Keebler: −$9,145.62
C) Pillsbury: −$10,740.18, Keebler: −$9,145.62
D) Pillsbury: −$10,740.18, Keebler: −$8,716.22

You Are Evaluating Two Different Cookie-Baking Ovens