The B.T. Knight Corporation is considering two mutually exclusive pieces of machinery that perform the same task. The two alternatives available provide the following set of after-tax net cash flows:
Year 0
Equipment A : ($2,200)
Equipment B : ($2,300)
Year 1-2
Equipment A : 1,826
Year 1-3 Equipment B : 1,204
NPV at 12%
Equipment A : 886
Equipment B : 592
1) Determine which model should be purchased using the Replacement Chain (RC) method. (5 points)
2) Calculate the equivalent annual annuity (EAA) for each model.
