Assume that each press has the same output capacity and has no market value at the end of its useful life; the selected analysis period is five years. Which press should be chosen?
Assume that each press has the same output capacity and has no market value at the end of its useful life; the selected analysis period is five years. Which press should be chosen?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company is planning to install a new automated plastic-moulding press. Four different presses are available. The initial capital investments and annual expenses for these four mutually exclusive alternatives are as follows:
Assume that each press has the same output capacity and has no market value at the end of its useful life; the selected analysis period is five years. Which press should be chosen? Use MARR = 20% per year.
Transcribed Image Text:P4
$52,000
Press
Capital investment
Useful life (years)
Annual expenses
P1
$24,000
P2
P3
$49,600
$30,400
5
5
5
4,800
16,800
Power
2,720
2,720
5,040
Labour
26,400
24,000
14,800
Maintenance
1,600
1,800
2,600
2,000
Property taxes and insurance
Total annual expenses
480
608
992
1,040
$31,200
$29,128
$25,192
$22,880
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