Hayden is considering replacing the copiers with new machines that would do essentially the same job. These machines cost $34,000, and the company can take out an eight-year maintenance contract for $1,900 a year. The machines would have no value by the end of the eight years and would be scrapped.
Both machines are depreciated using seven-year straight-line depreciation, and the tax rate is 35%. Assume for simplicity that the inflation rate is zero. The real cost of capital is 7%.
a. Calculate the equivalent annual cost, if the copiers are: (i) replaced now, (ii) replaced two years from now, or (iii) replaced six years from now. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.)Equivalent Annual Cost(i) Replaced now (ii) Replaced two years from now (iii) Replaced six years from now