A factory is comparing two final offers (A & B) to choose from. The initial price of the offer A is $ 3,200,000 with an expected annual maintenance of $ 130,000 and a salvage value of $ 300,000 after the 4 years life time of the project. On the other hand, the initial price of the offer B is $ 8,000,000 with an expected annual maintenance of $105,000 and a salvage value of $ 450,000 afher the 6 years life time of the project. The MARR of the factory is 18% per year. Calculate the present worth the factory has to pay for offer A using the LCM technique. $6,049.252 $6,049 252 S-11,238,298 OS-11,238.298

A factory is comparing two final offers (A & B) to choose from. The initial price of the offer A is $ 3,200,000 with an expected annual maintenance of $ 130,000 and a salvage value of $ 300,000 after the 4 years life time of the project. On the other hand, the initial price of the offer B is $ 8,000,000 with an expected annual maintenance of $105,000 and a salvage value of $ 450,000 afher the 6 years life time of the project. The MARR of the factory is 18% per year. Calculate the present worth the factory has to pay for offer A using the LCM technique. $6,049.252 $6,049 252 S-11,238,298 OS-11,238.298

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

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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Find the Present Worth of each of the option Investment: $10 million Annual Revenue: $103 million Breakdown: a) Ticket sales: $68 millionb) VIP Memberships: $13 million Concession revenues: $22 million Annual Costs: $75 million Breakdown: a) Maintenance: $35 millionb) Salaries: $8 millionc) Concession costs: $6 million d) Event Operations: $10 million e) Overhead: $16 million Major Maintenance Update every 20 years: $20 million GIVEN ASSUMPTIONS While any renovation is taking place, the stadium will be closed and there will be no annual revenue or annual costs It is estimated that all Annual Revenues grow at a rate of 1% per year, and all Annual Costs grow at a rate of 0.8% per year The MARR is 5% The stadium will only be used for 50 years after it is done being upgraded, and at that point it will have no salvage value.
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