The inflation rate is expected to be 5 percent per year and


Office Automation, Inc., must choose between two copiers, the XX40 or the RH45. The XX40 costs $1,100 and will last for 3 years. The copier will require a real aftertax cost of $140 per year after all relevant expenses. The RH45 costs $1,600 and will last 5 years. The real aftertax cost for the RH45 will be $115 per year. All cash flows occur at the end of the year. The inflation rate is expected to be 5 percent per year, and the nominal discount rate is 14 percent. Calculate the EAC for each copier.

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Financial Management: The inflation rate is expected to be 5 percent per year and
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