Lobo is a leading manufacturer of positronic brains, a key component in robots. The company is considering two alternative production methods. The costs and lives associated with each are Year Method 1 Method 2 0 -$6,700 -$9,900 1 -400 -620 2 -400 -620 3 -400 -620 4 -620 Assuming that Lobo will not replace the equipment when it wears out, which should it buy? If Lobo is going to replace the equipment, which should it buy (r = 13%)? suppose all the costs are before taxes and the tax rate is 39 percent. Both types of equipment would be depreciated at a CCA rate of 25 percent (Class 9), and would have no value after the project. What are the EACs in this case? Which is the preferred method?
