RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows: Equipment 1 Equipment 2 First Cost P 12,000 P 18,000 Salvage Value P 600 P 2,000 Annual Operation P 3,200 P 2,500 Annual Maintenance P 1,200 P 1,000 Taxes & Insurance 3% 3% Life, years 10 15 Money is worth at least 16%. Which equipment should be selected? Use: a. Rate of Return Method Rate of Return Method Annual Cost Method NOTE: Show cashflow diagram.
RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows: Equipment 1 Equipment 2 First Cost P 12,000 P 18,000 Salvage Value P 600 P 2,000 Annual Operation P 3,200 P 2,500 Annual Maintenance P 1,200 P 1,000 Taxes & Insurance 3% 3% Life, years 10 15 Money is worth at least 16%. Which equipment should be selected? Use: a. Rate of Return Method Rate of Return Method Annual Cost Method NOTE: Show cashflow diagram.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 19P
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Question
RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows:
|
Equipment 1 |
Equipment 2 |
First Cost |
P 12,000 |
P 18,000 |
Salvage Value |
P 600 |
P 2,000 |
Annual Operation |
P 3,200 |
P 2,500 |
Annual Maintenance |
P 1,200 |
P 1,000 |
Taxes & Insurance |
3% |
3% |
Life, years |
10 |
15 |
Money is worth at least 16%.
Which equipment should be selected?
Use: a.
- Rate of Return Method
- Annual Cost Method
NOTE: Show cashflow diagram.
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