An engineering consultancy firm makes an economic analysis of two machines that will be purchased. Machine B has an estimated life span of 14 years and would cost P20,000 with an annual maintenance cost of P300. Machine A has an estimated life span of 6 years and would cost P10,000 with an annual maintenance cost is expected to be 20% less with the Machine B. There will be an annual insurance cost that amounts to the 1% of the first cost of the machines. Machine A was a disposable machine while Machine B can be salvaged for P6,000. Based on its annual worth, what should the consultancy firm choose if the minimum attractive rate of return is 8% per annum.
An engineering consultancy firm makes an economic analysis of two machines that will be purchased. Machine B has an estimated life span of 14 years and would cost P20,000 with an annual maintenance cost of P300. Machine A has an estimated life span of 6 years and would cost P10,000 with an annual maintenance cost is expected to be 20% less with the Machine B. There will be an annual insurance cost that amounts to the 1% of the first cost of the machines. Machine A was a disposable machine while Machine B can be salvaged for P6,000. Based on its annual worth, what should the consultancy firm choose if the minimum attractive rate of return is 8% per annum.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
An engineering consultancy firm makes an economic analysis of two machines that will be purchased. Machine B has an estimated life span of 14 years and would cost P20,000 with an annual maintenance cost of P300. Machine A has an estimated life span of 6 years and would cost P10,000 with an annual maintenance cost is expected to be 20% less with the Machine B. There will be an annual insurance cost that amounts to the 1% of the first cost of the machines. Machine A was a disposable machine while Machine B can be salvaged for P6,000. Based on its annual worth, what should the consultancy firm choose if the minimum attractive rate of return is 8% per annum.
Expert Solution
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 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education