Answer: $45,310
Explanation:
Given that,
Current yearly income before taxes = $197,000
Hemingway plans to raise its before-tax yearly income to $339,000
Annual interest cost = $69,000
flat tax rate = 23%
Present annual corporate tax obligation = $197,000 × 23%
= $197,000 × 0.23
= $45,310
The primary option should be selected for procurement given its lower EAC. The breakdown is as follows: Option 1 costs $70,000 with a useful life of 6 years, whereas Option 2 costs $102,000 and lasts for 9 years.