Exercise 11-5

Eclipse Sabre
Years Amount Years
0 (1,400,000) $ 0
1 25,000 $ 1
2 30,000 $ 2
3 30,000 $ 3
4 30,000 $ 4
5 40,000 $ 5
6 40,000 $
7 40,000 $
8 40,000 $
9 40,000 $
10 40,000 $
Rate NPV Rate
12% (1,208,828.86) $ 12%
PV EAC PV
(1,591,171.14) $ (281,613.24) $ (1,010,734.60) $
The company should pick the Sabre model although it has a shorter life as its cost per year of owning and operation over its lifetime is significantly less compared to Eclipse model.
Amount
(800,000) $
50,000 $
50,000 $
60,000 $
60,000 $
80,000 $
NPV
(589,265.40) $
EAC
(280,385.76) $
The company should pick the Sabre model although it has a shorter life as its cost per year of owning and operation over its lifetime is significantly less compared to Eclipse model.