Two machines can be used to produce a part from titanium. The costs and other cash flows associated with each alternative are estimated. The salvage values are constant regardless of when the machines are replaced. Determine which alternative(s) should be selected for further analysis if alternatives must have a payback of 5 years or less. Perform the analysis with (a) i = 0%, and (b) i = 10% per year. Machine Semiautomatic Automatic First cost, $ −40,000 −90,000 Net annual income, $ per year 10,000 15,000 Maximum life, years 10 10 Salvage value, $ 0 0
Two machines can be used to produce a part from titanium. The costs and other cash flows associated with each alternative are estimated. The salvage values are constant regardless of when the machines are replaced. Determine which alternative(s) should be selected for further analysis if alternatives must have a payback of 5 years or less. Perform the analysis with (a) i = 0%, and (b) i = 10% per year. Machine Semiautomatic Automatic First cost, $ −40,000 −90,000 Net annual income, $ per year 10,000 15,000 Maximum life, years 10 10 Salvage value, $ 0 0
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Two machines can be used to produce a part from
titanium. The costs and other cash flows associated
with each alternative are estimated. The salvage values
are constant regardless of when the machines
are replaced. Determine which alternative(s) should
be selected for further analysis if alternatives must
have a payback of 5 years or less. Perform the analysis
with (a) i = 0%, and (b) i = 10% per year.
Machine Semiautomatic Automatic
First cost, $ −40,000 −90,000
Net annual income, $ per year 10,000 15,000
Maximum life, years 10 10
Salvage value, $ 0 0
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