MRAC is planning an investment in a machine. The machine has an invoice price of $120,000. The site preparation cost $10,000. It is expected to be used for 6 years with a salvage value of $15,000 at end of its life. Every year, the machine will require$24,000 for operation and maintenance. The machine is expected to be used for 2000 hours per year. The company's MARR is 10%. a) What is the capitalized equivalent cost of the machine? b) What is the total cost per hour for operating the machine?

MRAC is planning an investment in a machine. The machine has an invoice price of $120,000. The site preparation cost $10,000. It is expected to be used for 6 years with a salvage value of $15,000 at end of its life. Every year, the machine will require$24,000 for operation and maintenance. The machine is expected to be used for 2000 hours per year. The company's MARR is 10%. a) What is the capitalized equivalent cost of the machine? b) What is the total cost per hour for operating the machine?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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