A manufacturing company is attempting to determine the best-sized milling machine for their production shop. Five alternative sizes are available, as given in the following table. The company has a budget of $50000, and MARR = 15%. Which size machine should they purchase? Assume that the lifetime is n = 100 years and that the ultimate salvage value is zero for each machine. Machine I: Annual Revenue $1000, Initial Cost $10000 Machine II: Annual Revenue $5000, Initial Cost $20000 Machine III: Annual Revenue $7200, Initial Cost $40000 Machine IV: Annual Revenue $9000, Initial Cost $44000 Machine V: Annual Revenue $10000, Initial Cost $60000 A) v II II D) I IV

A manufacturing company is attempting to determine the best-sized milling machine for their production shop. Five alternative sizes are available, as given in the following table. The company has a budget of $50000, and MARR = 15%. Which size machine should they purchase? Assume that the lifetime is n = 100 years and that the ultimate salvage value is zero for each machine. Machine I: Annual Revenue $1000, Initial Cost $10000 Machine II: Annual Revenue $5000, Initial Cost $20000 Machine III: Annual Revenue $7200, Initial Cost $40000 Machine IV: Annual Revenue $9000, Initial Cost $44000 Machine V: Annual Revenue $10000, Initial Cost $60000 A) v II II D) I IV

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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