A factory manager is considering the purchase of one of the following hwo production equipment. Cash flow estimates for equipment A are in year-zero dollars while those of equipment B are in actual dollars Equipment A (year-zero S) $0,500 Equipment (actual S) $11.200 Intial investment Net annual revenue $3,000 $4,000 Market value at end of useful life Useful ife, years 11 11 The manager uses a market interest rate of 12% per year. If inflation rate is expected to average 5.66% per year over the next several years, determine the PW of each equipment. 1. The PW of Equipment Ais OA S14,101 OB. $14,578 OC. $12,500 OD. S8,313 2. The PW of Equipment Bis OA S20,347 OB. $16,200 OC. $20.903 OD. $12.51
A factory manager is considering the purchase of one of the following hwo production equipment. Cash flow estimates for equipment A are in year-zero dollars while those of equipment B are in actual dollars Equipment A (year-zero S) $0,500 Equipment (actual S) $11.200 Intial investment Net annual revenue $3,000 $4,000 Market value at end of useful life Useful ife, years 11 11 The manager uses a market interest rate of 12% per year. If inflation rate is expected to average 5.66% per year over the next several years, determine the PW of each equipment. 1. The PW of Equipment Ais OA S14,101 OB. $14,578 OC. $12,500 OD. S8,313 2. The PW of Equipment Bis OA S20,347 OB. $16,200 OC. $20.903 OD. $12.51
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...
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