Remerowski Corporation Inc. asks you to estimate the cost to purchase a new piece of production equipment. The company purchased this same type of equipment in the past for $8500. The original equipment had a capacity of 1500 units, while the new equipment has a capacity of 900 units. The power-sizing exponent for this type of equipment is 0.3. In addition, the cost index for this type of equipment was 111 when the original unit was purchased and is now 195. If Remerowski uses an 8% annual interest rate to evaluate equipment purchases, estimate the cost to purchase the new piece.
Remerowski Corporation Inc. asks you to estimate the cost to purchase a new piece of production equipment. The company purchased this same type of equipment in the past for $8500. The original equipment had a capacity of 1500 units, while the new equipment has a capacity of 900 units. The power-sizing exponent for this type of equipment is 0.3. In addition, the cost index for this type of equipment was 111 when the original unit was purchased and is now 195. If Remerowski uses an 8% annual interest rate to evaluate equipment purchases, estimate the cost to purchase the new piece.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Remerowski Corporation Inc. asks you to estimate the cost to purchase a new piece of production equipment. The company purchased this same type of equipment in the past for $8500. The original equipment had a capacity of 1500 units, while the new equipment has a capacity of 900 units. The power-sizing exponent for this type of equipment is 0.3. In addition, the cost index for this type of equipment was 111 when the original unit was purchased and is now 195. If Remerowski uses an 8% annual interest rate to evaluate equipment purchases, estimate the cost to purchase the new piece.
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