A production machine costs $40,000 and has a 7-year useful life. At the end of 7 years, it can be sold for $10,000. (a) If interest is 10% compounded quarterly, what is the equivalent annual cost of ownership of this machine over its useful life? (b) The company that buys the 7-year old machine uses it for an additional 5 years and then wants to responsibly dispose of it. What green options does the company have? Research and report to the firm on what happens to most industrial machinery after its useful life.
A production machine costs $40,000 and has a 7-year useful life. At the end of 7 years, it can be sold for $10,000. (a) If interest is 10% compounded quarterly, what is the equivalent annual cost of ownership of this machine over its useful life? (b) The company that buys the 7-year old machine uses it for an additional 5 years and then wants to responsibly dispose of it. What green options does the company have? Research and report to the firm on what happens to most industrial machinery after its useful life.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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A production machine costs $40,000 and has a 7-year useful life. At the end of 7 years, it can be sold for $10,000. (a) If interest is 10% compounded quarterly, what is the equivalent annual cost of ownership of this machine over its useful life? (b) The company that buys the 7-year old machine uses it for an additional 5 years and then wants to responsibly dispose of it. What green options does the company have? Research and report to the firm on what happens to most industrial machinery after its useful life.
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