A company is considering the purchase of either machine A or machine B. And the interest rate is 10%. The following table shows the cash flows of both machines. Machine Initial investment ($) Other costs ($) Service life (years) Salvage value ($) Cash flow diagram for Machine A: A $80,000 $10,000 for the first 10 years, increasing at a rate of 5% from year 11 onwards 20 20,000 PW of machine A: B $100,000 $15,000 for the first 15 years and $20,000 for the remaining years a) Which alternative should the company choose if it adopts an interest rate of 10%? Use present worth (PW) method to evaluate the two machines and show your calculations in the space given below. 20 25,000

A company is considering the purchase of either machine A or machine B. And the interest rate is 10%. The following table shows the cash flows of both machines. Machine Initial investment ($) Other costs ($) Service life (years) Salvage value ($) Cash flow diagram for Machine A: A $80,000 $10,000 for the first 10 years, increasing at a rate of 5% from year 11 onwards 20 20,000 PW of machine A: B $100,000 $15,000 for the first 15 years and $20,000 for the remaining years a) Which alternative should the company choose if it adopts an interest rate of 10%? Use present worth (PW) method to evaluate the two machines and show your calculations in the space given below. 20 25,000

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 1.1CE: What life cycle cost concept begins raising concerns by year 5 with any electric vehicle (EV)? If...

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