QBS company wishes to replace its current equipment that was purchased 8years ago with the newer technology. System A will have a first cost of P1.6M, an operating cost of P70,000 per year, and a salvage value of P400,000 after its 4-year life. System B will have a first cost of P2.1M, an operating cost of P50,000 the first year with an expected increase of P3,000 per year thereafter, and no salvage value after its 8-year life. On the basis of a future worth analysis at an interest rate of 12% per year, write the ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2
QBS company wishes to replace its current equipment that was purchased 8years ago with the newer technology. System A will have a first cost of P1.6M, an operating cost of P70,000 per year, and a salvage value of P400,000 after its 4-year life. System B will have a first cost of P2.1M, an operating cost of P50,000 the first year with an expected increase of P3,000 per year thereafter, and no salvage value after its 8-year life. On the basis of a future worth analysis at an interest rate of 12% per year, write the ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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