Exercise 2:Compare the machines shown on the basis of their capitalized costs and an interest rate of 10% per year todetermine which of these mutually exclusive alternatives is economically the best.Мachine AМachine BFirst cost200,00040,000 in year 1 and increasing by1,000 until year 825,000800,000Annual operating cost12,000Salvage value1,000,000Life in years8.

Given, Firstly consider the Machine A Initial cost (C) = 200000 Salvage (S) = 25000 Maintenance…

Compare the machines shown on the basis of their capitalized costs and an interest rate of 10% per year to determine which of these mutually exclusive alternatives is economically the best. Machine A Machine B 200,000 40,000 in year 1 and increasing by 1,000 until year 8 25,000 First cost 800,000 Annual operating cost 12,000 Salvage value 1,000,000 Life in years 8 00

Compare the machines shown on the basis of their capitalized costs and an interest rate of 10% per year to determine which of these mutually exclusive alternatives is economically the best. Machine A Machine B 200,000 40,000 in year 1 and increasing by 1,000 until year 8 25,000 First cost 800,000 Annual operating cost 12,000 Salvage value 1,000,000 Life in years 8 00

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 21P

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