A manual stamping machine currently valued at Rs. 1000/- is expected to last 2 years and costs Rs 4000/- per year to operate. An automatic stamping machine, which can be purchased for Rs. 3000/-, which last for 4 years and can be operated at an annual cost of Rs. 3000/-. If money carries the rate of interest 10 % per annum, determine which stamping machine is to be purchased?

A manual stamping machine currently valued at Rs. 1000/- is expected to last 2 years and costs Rs 4000/- per year to operate. An automatic stamping machine, which can be purchased for Rs. 3000/-, which last for 4 years and can be operated at an annual cost of Rs. 3000/-. If money carries the rate of interest 10 % per annum, determine which stamping machine is to be purchased?

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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