Vendor R Vendor T Rental Initial cost, $ -75,000 - 125,000 Annual upkeep, $ per year -27,000 - 12,000 Annual rental, $ per year -50,000 Salvage value, $ 30,000 Estimated life, years 3 Maximum of 3 2.
Vendor R Vendor T Rental Initial cost, $ -75,000 - 125,000 Annual upkeep, $ per year -27,000 - 12,000 Annual rental, $ per year -50,000 Salvage value, $ 30,000 Estimated life, years 3 Maximum of 3 2.
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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Question
The manager of engineering at the 900-megawatt Hamilton Nuclear Power Plant has three options to supply personal safety equipment to employees. Two are vendors who sell the items, and the third alternative is to rent the equipment for $50,000 per year, but for no more than 3 years per contract. These items have relatively short lives due to constant use. The MARR is 10% per year.
a. Select from the two vendors using the LCM and PW analysis.
b. Determine which of the three options is cheaper over a study period of 3 years.
Transcribed Image Text:Vendor R
Vendor T
Rental
Initial cost, $
-75,000
- 125,000
Annual upkeep,
$ per year
-27,000
- 12,000
Annual rental,
$ per year
-50,000
Salvage value, $
30,000
Estimated life,
years
3
Maximum
of 3
2.
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