An private firm can buy a machine for $ 40,000. A down payment of $ 4,000 is required and the balance can be paid in equal terms of 5 years at 6% interest on the unpaid balance. As an alternative the machine can be purchased for $ 36,000 in cash. If the firm's MARR is 15%, determine which of the alternatives should be accepted using the annual equivalency method. Set the Equivalent Annuity for option 1 Set the Equivalent Annuity for option 2 Establish the conclusion as to the option to be selected.
An private firm can buy a machine for $ 40,000. A down payment of $ 4,000 is required and the balance can be paid in equal terms of 5 years at 6% interest on the unpaid balance. As an alternative the machine can be purchased for $ 36,000 in cash. If the firm's MARR is 15%, determine which of the alternatives should be accepted using the annual equivalency method. Set the Equivalent Annuity for option 1 Set the Equivalent Annuity for option 2 Establish the conclusion as to the option to be selected.
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
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An private firm can buy a machine for $ 40,000. A down payment of $ 4,000 is required and the balance can be paid in equal terms of 5 years at 6% interest on the unpaid balance. As an alternative the machine can be purchased for $ 36,000 in cash. If the firm's MARR is 15%, determine which of the alternatives should be accepted using the annual equivalency method.
Set the Equivalent
Set the Equivalent Annuity for option 2
Establish the conclusion as to the option to be selected.
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