Machine A costs $500,000 to purchase, result in electricity bills of $100,000 per year, and last for 12 years. Machine B costs $600,000 to purchase, result in electricity bills of $85,000 per year, and last for 15 years. The discount rate is 9%. What are the equivalent annual costs for two models? Which model is more cost-effective?
Machine A costs $500,000 to purchase, result in electricity bills of $100,000 per year, and last for 12 years. Machine B costs $600,000 to purchase, result in electricity bills of $85,000 per year, and last for 15 years. The discount rate is 9%. What are the equivalent annual costs for two models? Which model is more cost-effective?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter21: Supply Chains And Working Capital Management
Section: Chapter Questions
Problem 10MC
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Machine A costs $500,000 to purchase, result in electricity bills of $100,000 per year, and last for 12 years. Machine B costs $600,000 to purchase, result in electricity bills of $85,000 per year, and last for 15 years. The discount rate is 9%. What are the equivalent annual costs for two models? Which model is more cost-effective?
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