Bramble Inc. plans to purchase a new metal stamping machine for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The engineering department has determined that each vendor's stamping machine is substantially identical and each has a useful life of 30 years. In addition, engineering has estimated that required year-end maintenance costs will be $2,790 per year for the first 10 years, $4,790 per year for the next 10 years, and $11,790 per year for the last 10 years. Following is each vendor's sale package: Vendor A: $36,200 cash at time of delivery and 5 year-end payments of $50,300 each. Vendor A offers all its customers the right to purchase at the time of sale a separate 30-year maintenance service contract, under which Vendor A will perform all year-end maintenance at a one-time initial cost of $47,300. Vendor B: Forty semiannual payments of $13,100 each, with the first installment due upon delivery. Vendor B will perform all year-end maintenance for the next 30 years at no extra charge. Vendor C: Full cash price of $204,000 will be due upon delivery. Assuming that both Vendors A and B will be able to perform the required year-end maintenance, that Bramble's cost of funds is 8%, and the machine will be purchased on January 1, compute the following: Click here to view factor tables The present value of the cash flows for vendor A. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581) The present value of the cash outflows for this option is $ The present value of the cash flows for vendor B. (Round factor values to 5 decimal places, eg. 1.25124 and final answer to O decimal places, e.g. 458,581) The present value of the cash outflows for this option is $ The present value of the cash flows for vendor C. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581) The present value of the cash outflows for this option is $ 204000 From which vendor should the stamping machine be purchased? The press should be purchased from
Bramble Inc. plans to purchase a new metal stamping machine for use in its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The engineering department has determined that each vendor's stamping machine is substantially identical and each has a useful life of 30 years. In addition, engineering has estimated that required year-end maintenance costs will be $2,790 per year for the first 10 years, $4,790 per year for the next 10 years, and $11,790 per year for the last 10 years. Following is each vendor's sale package: Vendor A: $36,200 cash at time of delivery and 5 year-end payments of $50,300 each. Vendor A offers all its customers the right to purchase at the time of sale a separate 30-year maintenance service contract, under which Vendor A will perform all year-end maintenance at a one-time initial cost of $47,300. Vendor B: Forty semiannual payments of $13,100 each, with the first installment due upon delivery. Vendor B will perform all year-end maintenance for the next 30 years at no extra charge. Vendor C: Full cash price of $204,000 will be due upon delivery. Assuming that both Vendors A and B will be able to perform the required year-end maintenance, that Bramble's cost of funds is 8%, and the machine will be purchased on January 1, compute the following: Click here to view factor tables The present value of the cash flows for vendor A. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581) The present value of the cash outflows for this option is $ The present value of the cash flows for vendor B. (Round factor values to 5 decimal places, eg. 1.25124 and final answer to O decimal places, e.g. 458,581) The present value of the cash outflows for this option is $ The present value of the cash flows for vendor C. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581) The present value of the cash outflows for this option is $ 204000 From which vendor should the stamping machine be purchased? The press should be purchased from
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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Transcribed Image Text:Bramble Inc. plans to purchase a new metal stamping machine for use in its manufacturing process. After contacting the appropriate
vendors, the purchasing department received differing terms and options from each vendor. The engineering department has
determined that each vendor's stamping machine is substantially identical and each has a useful life of 30 years. In addition,
engineering has estimated that required year-end maintenance costs will be $2,790 per year for the first 10 years, $4,790 per year for
the next 10 years, and $11,790 per year for the last 10 years. Following is each vendor's sale package:
Vendor A: $36,200 cash at time of delivery and 5 year-end payments of $50,300 each. Vendor A offers all its customers the right to
purchase at the time of sale a separate 30-year maintenance service contract, under which Vendor A will perform all year-end
maintenance at a one-time initial cost of $47,300.
Vendor B: Forty semiannual payments of $13,100 each, with the first installment due upon delivery. Vendor B will perform all year-end
maintenance for the next 30 years at no extra charge.
Vendor C: Full cash price of $204,000 will be due upon delivery.
Assuming that both Vendors A and B will be able to perform the required year-end maintenance, that Bramble's cost of funds is 8%,
and the machine will be purchased on January 1, compute the following:
Click here to view factor tables
The present value of the cash flows for vendor A. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal
places, e.g. 458,581)
The present value of the cash outflows for this option is $
The present value of the cash flows for vendor B. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal
places, e.g. 458,581)
The present value of the cash outflows for this option is $
The present value of the cash flows for vendor C. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal
places, e.g. 458,581)
The present value of the cash outflows for this option is $
204000
From which vendor should the stamping machine be purchased?
The press should be purchased from
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