A five-year project has an initial fixed asset investment of $280,000, an initial NWC investment of $24,000, and an annual OCF of −$23,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 12 percent, what is this project’s equivalent annual cost, or EAC?

A five-year project has an initial fixed asset investment of $280,000, an initial NWC investment of $24,000, and an annual OCF of −$23,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 12 percent, what is this project’s equivalent annual cost, or EAC?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1BE: Average rate of return Determine the average rate of return for a project that is estimated to yield...

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