A firm is considering the purchase of a new machine to increase the output of an existing production process. If each of these machines provides the same service over their useful lives and the MARR is 15%, Alternative B Alternative A Initial Investment $14,000 Annual Cost $14,000 Market Value at $8,000 End of Useful Life Useful Life 5 years $65,000 $9,000 $13,000 20 years a) Which machine would be selected on the basis of repeatability assumption? b) Using co-terminated assumption with a 5 year study period (compute imputed market value for alternative B), which alternative is preferred? c) If perpetual service life is assumed, which of these alternatives do you recommend?
A firm is considering the purchase of a new machine to increase the output of an existing production process. If each of these machines provides the same service over their useful lives and the MARR is 15%, Alternative B Alternative A Initial Investment $14,000 Annual Cost $14,000 Market Value at $8,000 End of Useful Life Useful Life 5 years $65,000 $9,000 $13,000 20 years a) Which machine would be selected on the basis of repeatability assumption? b) Using co-terminated assumption with a 5 year study period (compute imputed market value for alternative B), which alternative is preferred? c) If perpetual service life is assumed, which of these alternatives do you recommend?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
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Engg economy. Pls answer a, b, and c. Thank you.
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