A chemical company is considering buying a new production equipment. The following models are identified as viable candidates from the technical perspectives. The company's MARR is 8%. The estimated cash flows for each alternative are below. Suppose the cotermination assumption is made. Please round all your answers to the nearest integer. Machine A: • Capital Investment: $34,000 • Useful Life: 8 years • Market Value at the End of Life: $6,000 • Annual Revenues: $153,000 • Annual Expenses: $i19,000 Machine B: • Capital Investment: 814,000 • Useful Life: 15 years • Market Value at the End of Life: $6,000 · Annual Revenues: $198,000 • Annual Expenses: $154,000 Machine C: • Capital Investment: $55,000 • Useful Life: 7 years • Market Value at the End of Life: $2,000 • Annual Revenues: $247,500 • Annual Expenses: $192,500 a) What is FW of Machine A? b) What is FW of Machine B? c) What is FW of Machine C?

A chemical company is considering buying a new production equipment. The following models are identified as viable candidates from the technical perspectives. The company's MARR is 8%. The estimated cash flows for each alternative are below. Suppose the cotermination assumption is made. Please round all your answers to the nearest integer. Machine A: • Capital Investment: $34,000 • Useful Life: 8 years • Market Value at the End of Life: $6,000 • Annual Revenues: $153,000 • Annual Expenses: $i19,000 Machine B: • Capital Investment: 814,000 • Useful Life: 15 years • Market Value at the End of Life: $6,000 · Annual Revenues: $198,000 • Annual Expenses: $154,000 Machine C: • Capital Investment: $55,000 • Useful Life: 7 years • Market Value at the End of Life: $2,000 • Annual Revenues: $247,500 • Annual Expenses: $192,500 a) What is FW of Machine A? b) What is FW of Machine B? c) What is FW of Machine C?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 2P

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