The following data applies for example problems 8.1 through 8.3. A company isconsidering the purchase of either machine A or machine B.machine Amachine Binitial cost$80,00020 years$20,000$18,000 per year$100,00025 years$25,000$15,000 per year for the first 15 years$20,000 per year for the next 10 yearsestimated lifesalvage valueother costsThe interest rate is 10%, and all cash flows may be treated as end-of-year cashflows. Assume that equivalent annual cost is the value of the constant annuityequal to the total cost of a project. The equivalent annual cost of machine B ismost nearly(A) $21,000(B) $21,500(C) $23,000(D) $26,500

Equivalent annual cost measures the annual cost of operating and maintaining any assets, for the…

The following data applies for example problems 8.1 through 8.3. A company is considering the purchase of either machine A or machine B. nitial cost estimated life salvage value machine A $80,000 20 years $20,000 $18,000 per year machine B $100,000 25 years $25,000 $15,000 per year for the first 15 years $20,000 per year for the next 10 years other costs The interest rate is 10%, and all cash flows may be treated as end-of-year cash lows. Assume that equivalent annual cost is the value of the constant annuity equal to the total cost of a project. The equivalent annual cost of machine B is most nearly (A) $21,000

The following data applies for example problems 8.1 through 8.3. A company is considering the purchase of either machine A or machine B. nitial cost estimated life salvage value machine A $80,000 20 years $20,000 $18,000 per year machine B $100,000 25 years $25,000 $15,000 per year for the first 15 years $20,000 per year for the next 10 years other costs The interest rate is 10%, and all cash flows may be treated as end-of-year cash lows. Assume that equivalent annual cost is the value of the constant annuity equal to the total cost of a project. The equivalent annual cost of machine B is most nearly (A) $21,000

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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