A company with a Can CORN of 15% must install one of two production machines that provide equivalent service (same benefits). Machine X has an initial cost of $40,000 with an annual operating and maintenance (O&M) cost of $30,000 and a salvage value of $5,000 after its 5-year life. Machine Y has an initial cost of $60,000 with an annual O&M cost of $20,000 and a salvage value of $12,000 after its 10-year life. Which choice below gives the correct PW (costs) equation for machine X over the comparative analysis period? PW(cost) = $40k + $40k(P/F,15%,5) + $30k(P/A,15%,10) - $5k(P/F,15%,5) - $5k(P/F,15%,10) PW(cost) = $40k + $30k(P/A,15%,5) - $5k(P/F,15%,5) PW(cost) = $40k + $40k(P/F,15%,5) - $5k(P/F,15%,5) - $5k(P/F,15%,10) PW(cost) = $40k +$40k(P/F,15%,5) + $30k(P/A,15%,10) - $5k(P/F,15%,5)
A company with a Can CORN of 15% must install one of two production machines that provide equivalent service (same benefits). Machine X has an initial cost of $40,000 with an annual operating and maintenance (O&M) cost of $30,000 and a salvage value of $5,000 after its 5-year life. Machine Y has an initial cost of $60,000 with an annual O&M cost of $20,000 and a salvage value of $12,000 after its 10-year life. Which choice below gives the correct PW (costs) equation for machine X over the comparative analysis period? PW(cost) = $40k + $40k(P/F,15%,5) + $30k(P/A,15%,10) - $5k(P/F,15%,5) - $5k(P/F,15%,10) PW(cost) = $40k + $30k(P/A,15%,5) - $5k(P/F,15%,5) PW(cost) = $40k + $40k(P/F,15%,5) - $5k(P/F,15%,5) - $5k(P/F,15%,10) PW(cost) = $40k +$40k(P/F,15%,5) + $30k(P/A,15%,10) - $5k(P/F,15%,5)
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 4P
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A company with a Can CORN of 15% must install one of two production machines that provide equivalent service (same benefits).
Machine X has an initial cost of $40,000 with an annual operating and maintenance (O&M) cost of $30,000 and a salvage value of $5,000 after its 5-year life.
Machine Y has an initial cost of $60,000 with an annual O&M cost of $20,000 and a salvage value of $12,000 after its 10-year life.
Which choice below gives the correct PW (costs) equation for machine X over the comparative analysis period?
PW(cost) = $40k + $40k(P/F,15%,5) + $30k(P/A,15%,10) - $5k(P/F,15%,5) - $5k(P/F,15%,10)
PW(cost) = $40k + $30k(P/A,15%,5) - $5k(P/F,15%,5)
PW(cost) = $40k + $40k(P/F,15%,5) - $5k(P/F,15%,5) - $5k(P/F,15%,10)
PW(cost) = $40k +$40k(P/F,15%,5) + $30k(P/A,15%,10) - $5k(P/F,15%,5)
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