Company C is seeking for help to decide this option to choose to upgrade their current bottleneck equipment. There are two vendors and onerental option. The cost details are shown in the table below.Vender R7500028000OptionInitial CostAnnual Operation CostSalvage Value0Estimated Life in Year2MARR = 10% per year compounded monthly.Vender T12500012000300003Rental0520000Maximum 3 years1. Select from the two sales vendors using the LCM and PW analysis.2.Determine which of the three options is cheaper over a 3 year study period.

The PW analysis requires to calculate the present worth of each of the options and select the option…

Answered: Company C is seeking for help to decide…

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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A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A:PurchaseCost of Equipment 700,581Salvage Value 105,896Daily operating cost 534Economic life, years 10 Alternative B: Rental at 1,539 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.
A firm is considering three mutually exclusive alternatives as a part of an upgrade to an existing transportation network. If the MARR is 10% per year, which alternative(if any) should be chosen using the IRR analysis procedure? Use trial & error and show your calculations. A B C Initial Cost 40000 30000 20000 Annual Revenue 10400 8560 7750 Annual Cost 4000 3000 2500 Salvage Value 3000 2500 2000 Useful Life 20 20 10
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