You are the design consultant comparing two pump options. The first option has an installation cost of $36,000 and lasts 40 years with $1,000 maintenance every 10 years. The second option has an installation cost of $30,000 and lasts 40 years if a large refurbishment of $15,000 is conducted after 20 years. Assuming a 5% annual interest rate, what is the difference in present value between options 1 and 2? (Option 1 – Option 2) a. $1,711 O b. $2,710 C. -$6,000 d. $1,569

You are the design consultant comparing two pump options. The first option has an installation cost of $36,000 and lasts 40 years with $1,000 maintenance every 10 years. The second option has an installation cost of $30,000 and lasts 40 years if a large refurbishment of $15,000 is conducted after 20 years. Assuming a 5% annual interest rate, what is the difference in present value between options 1 and 2? (Option 1 – Option 2) a. $1,711 O b. $2,710 C. -$6,000 d. $1,569

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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You are the design consultant comparing two pump options. The first option has an installation cost of $34,000 and lasts 40 yearswith $1,000 maintenance every 10 years. The second option has an installation cost of $30,000 and lasts 40 years if a largerefurbishment of $15,000 is conducted after 20 years. Assuming a 4% MARR, Pv option 1 pv option 2 which option is the best
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Suppose that you have $16,000 to invest and you are trying to decide between investing in project A or project B. If you invest in project A, you will receive a payment of $19,000 at the end of 3 years. If you invest in project B, you will receive a payment of $48,000 at the end of 21 years. The annual interest rate is 5 percent and both projects carry no risk. Instructions: Round your answers to the nearest dollar. Do not round your intermediate calculations. a What is the present value of each project? Enter your answers in the table below. Project A Project B Present Value $ s b. Which project will you choose for your investment? O Project A O Project B
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