Problem:
Bridgton Golf Academy is evaluating different golf practice equipment. The "Dimple-Max" equipment costs $95,000, has a 4 year life, and costs $8,700 per year to operate. The relevant discount rate is 13 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $18,500 at the end of the project's life. The relevant tax rate is 35 percent. All cash flows occur at the end of the year.
Required:
Question: What is the equivalent annual cost (EAC) of this equipment?
Note: Please provide equation and explain comprehensively and give step by step solution.