EXCEL, an equipment costing $100,000 has a useful life of 6 years. It has a resale value of $8,000. Annual costs will be $7,000 for each of the year. Another equipment, APLUS costing $120,000 has a useful life of eight years, after which time its estimated resale value will be $25,000. Annual costs will be $5,000 for the first three years and then $8,000 for each of the next five years. Compute the annual equivalent cost for each equipment using a discount rate of 10%. Which equipment will be your choice and why?
EXCEL, an equipment costing $100,000 has a useful life of 6 years. It has a resale value of $8,000. Annual costs will be $7,000 for each of the year. Another equipment, APLUS costing $120,000 has a useful life of eight years, after which time its estimated resale value will be $25,000. Annual costs will be $5,000 for the first three years and then $8,000 for each of the next five years. Compute the annual equivalent cost for each equipment using a discount rate of 10%. Which equipment will be your choice and why?
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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EXCEL, an equipment costing $100,000 has a useful life of 6 years. It has a resale value of $8,000. Annual costs will be $7,000 for each of the year. Another equipment, APLUS costing $120,000 has a useful life of eight years, after which time its estimated resale value will be $25,000. Annual costs will be $5,000 for the first three years and then $8,000 for each of the next five years. Compute the annual equivalent cost for each equipment using a discount rate of 10%. Which equipment will be your choice and why? Round your answers to 2 decimal points.
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