Hi, I'm confused on this quesiton and have no idea how to solve it or where I'm going wrong.
The question is :
You work for a business and need to upgrade the photocopier and binding machine. You have narrowed the choice to two models. The first one, the Alex, costs 18,000 and will save you 8,000 per year compared to your present method. The Alex will last six years, and will have a disposal value of 3,000 when it is retired. The second choice is the Athena, which costs 24,000 and will save you 6,000 per year. The Athena will last eight years, and will have a disposal value of 5,250 when it is retired. Calculate the EUAC for each machine, and decide which is the best on the basis of EUAC. Your company evaluates capital using a rate of 15 percent effective.
So for Alex, I set CFo=(-18,000+8000)=10,000. C01=8,000, F01=5. C02=3,000, F01=1. When I try to find the NPV I get -18114.22.
So I do N=6, I/Y=15, P/Y & C/Y=1, PV=-18114.22, FV=0 and solve for PMT however that doesn't give me the correct answer. Where am I going wrong? I did the same thing but with different numbers for Athena and still got it wrong as well.