4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5 years. The machine needs to be maintained at an annual cost of $2000. The machine has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%. (a) Draw the cash flow diagram. b) Determine the equivalent present and annual revenue of the machine. c) Determine the annual cost of owning the machine. d) Determine if this is a good investment using AE.
4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5 years. The machine needs to be maintained at an annual cost of $2000. The machine has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%. (a) Draw the cash flow diagram. b) Determine the equivalent present and annual revenue of the machine. c) Determine the annual cost of owning the machine. d) Determine if this is a good investment using AE.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash
flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5
years. The machine needs to be maintained at an annual cost of $2000. The machine
has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%.
(a) Draw the cash flow diagram. b) Determine the equivalent present and annual
revenue of the machine. c) Determine the annual cost of owning the machine. d)
Determine if this is a good investment using AE.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc84b2aa0-6217-4310-89ee-bd2b3792e4e6%2F158ae5b4-96bf-4cc4-aa52-198b77e89a72%2F2w21i9k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. A company is planning to invest $40,000 on a milling machine at year 0. The net cash
flows generated from year 1 to year 6 is: $8000, and $10,000 equally in the following 5
years. The machine needs to be maintained at an annual cost of $2000. The machine
has a 6-year service life and can be resold at the price at $6000 then. The MARR is 12%.
(a) Draw the cash flow diagram. b) Determine the equivalent present and annual
revenue of the machine. c) Determine the annual cost of owning the machine. d)
Determine if this is a good investment using AE.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education