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A company is buying a new decice that has a three year life. The device costs $60,000 and straight line depreciation will be used until the device is depreciated to zero. Over the next three years, the device will bring in sales of $280,000 each year. $15,000 in working capital will also be invested when the device is initially purchased. This working capital investment will be recovered at the end of the devices lifespan. The operating costs not including depreciation are 80% of the sales over the three year period. The company predicts the device will sell for $12,000 pre-tax at the end of the third year. The cost of capital is 10% and the tax rate is 25%.Calculate the EAA and NPV.
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