FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Three alternatives have the following cost data associated with them:
Data
Alt. 1
Alt. 2
Alt. 3
Useful Life, Years
10
10
10
First Cost
$1,325,000
$1,980,000
$1,650,000
Annual Benefit
265,000
589,000
435,000
Annual M&O Costs
95,000
97,000
91,000
Annual M&O Gradient
2,300
2,100
1,980
Salvage Value
145,000
205,000
178,000
Loan Payment
150,946
225,565
187,971
The loan payments are calculated using an interest rate of 10%, a life equal to the life of
the machine, and a down payment of 30%. Use a MARR of 12% and determine which
machine, if any, should be purchased. Use incremental analysis.
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Transcribed Image Text:Three alternatives have the following cost data associated with them: Data Alt. 1 Alt. 2 Alt. 3 Useful Life, Years 10 10 10 First Cost $1,325,000 $1,980,000 $1,650,000 Annual Benefit 265,000 589,000 435,000 Annual M&O Costs 95,000 97,000 91,000 Annual M&O Gradient 2,300 2,100 1,980 Salvage Value 145,000 205,000 178,000 Loan Payment 150,946 225,565 187,971 The loan payments are calculated using an interest rate of 10%, a life equal to the life of the machine, and a down payment of 30%. Use a MARR of 12% and determine which machine, if any, should be purchased. Use incremental analysis.
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