Semper Mortgage wishes to select the best of three possible computers, each expected to meet the fi rm’s growing need for computational and storage capacity. The three computers—A, B, and C—are...

Semper Mortgage wishes to select the best of three possible computers, each expected to meet the fi rm’s growing need for computational and storage capacity. The three computers—A, B, and C—are equally risky. The fi rm plans to use a 12 percent cost of capital to evaluate each of them. The initial outlay and the annual cash outfl ows over the life of each computer are shown in the following table. Computer A Computer B Computer C Initial Outlay (CF0 ) $50,000 $35,000 $60,000 Year (t) Cash Outfl ows (CFt ) 1 $ 7,000 $ 5,500 $18,000 2 7,000 12,000 18,000 3 7,000 16,000 18,000 4 7,000 23,000 18,000 5 7,000 — 18,000 6 7,000 — 18,000 a. Calculate the NPV for each computer over its life. Rank the computers in descending order, based on NPV. b. Use the equivalent annual cost (EAC) method to evaluate and rank the computers in descending order, based on the EAC. c. Compare and contrast your fi ndings in parts (a) and (b). Which computer would you recommend that the fi rm acquire? Why?